There sometimes can be a fine line between legitimate strategic tax planning and thecreation of artificial tax schemes which HMRC may characterise as tax avoidance.
Tax avoidance is generally defined as using legal means to pay the least possible amount of tax - as opposed to tax evasion, which involves using illegal methods.
However, governments around the world are taking an increasingly strong line to frustrate schemes which may break no laws at the time they are created, but utilise these legal loopholes to produce outcomes which the legislators never intended.
In recent years there has been a significant increase in the proliferation of schemes which seek to provide tax advantages which, HMRC argues, are not intended under the laws. These schemes often include steps which would not normally be expected to be undertaken.
HMRC are successfully challenging such schemes on the basis of historic case law, where it can be shown that these steps provide no commercial benefit to the business.
If you are considering participating in a scheme, or have participated in a scheme which is being challenged by HMRC, please contact our expert tax advisers to avoid or mitigate the potential damage to your personal tax position.