27 Jul The Trouble With Tax – Why Avoiding Contentious Tax Management Strategies is Vital
As this year’s general election campaigning has illustrated, taxation is a subject that seldom strays far from the centre of national political debate.
On the surface at least, the traditional wrangling between left and right continues to revolve around the headline levels at which corporate and personal taxes are paid, and the degree to which ‘those with broader shoulders’ should contribute a ‘bit more’ to fund public services. Each party has its view, and it’s often one of the key battlegrounds on which elections are won and lost.
But over the last few years, we’ve seen the political debate extending beyond the optimal levels for corporate and personal taxes. Thanks in part to the tax management strategies of certain multinational companies, politicians on both sides of the House of Commons have declared themselves determined to ensure that the UK tax system is not only fair but also seen to be fair.
And as a consequence, tax management has become a contentious issue, and that applies not only to companies but also to individual taxpayers.
Arguably the corporate tax management activities of big, multinational tech companies have been the catalyst for a new approach to taxation, not just by the authorities in the UK but also globally. Reports of businesses ringing up massive profits in one country but assigning their earnings to lower-tax jurisdictions have generated a degree of resentment among voters, and this has, in turn, spurred legislators to promise more scrutiny. The same principles apply to personal taxation. Backed by the government, HMRC is demonstrably keen to crack down on aggressive tax avoidance schemes that skirt the fringes of legality.
For instance, in 2016, the UK government revealed that HMRC had increased its tax take by £400m over the year by taking a tougher line on avoidance. Often this involved scrutiny of investment vehicles such as funds putting money into motion picture development. Investors who fell foul of the taxman often had to find the money to pay both the taxes owed and the associated penalties within 90 days under the ‘Accelerated payment notice’ scheme.
Further measures to crack down on tax avoidance were spelled out in the 2017 Finance Bill. In particular, the legislation targeted so-called enablers of tax avoidance schemes, a term that includes designers of plans and those who market them.
Meanwhile, the Bill proposed that taxpayers using such schemes would be regarded as ‘careless’ if they failed to take expert advice on their legality.
In the view of The Route – Income, this direction of travel towards tighter tax laws is likely to continue, regardless of the governing party. It is therefore vital that individuals proceed with due care when managing their tax affairs. And in particular, when acting to reduce annual tax bills, anything contentious should be avoided.
The Route – Income
The good news is, however, that those who take a sensible and non-contentious approach to tax planning can do much to ensure their tax bills are optimised in an entirely lawful way.
One of four pillars of The Route – City wealth club, The Route – Income, provides Members with professional advice on how to reduce their tax bills without exposing themselves to risk. Its approach is to focus on efficiency, not avoidance.
The Route – Income will look at every aspect of the tax you pay – in the current year but also historically, with the aim of ensuring that you are purchasing and holding your assets tax efficiently regarding the income generated and the profits earned.
But the scope of The Route – Income goes further by providing access to a network of businesses which can provide professional advice on income tax, capital gains tax, and share options, plus guidance on accountancy and the self-assessment process.
No one wants to pay more tax than they should. Indeed, HMRC itself has stated that it wants every taxpayer to pay the right amount – not too much or too little. The imperative should always be to pay the lowest amount permissible under the current legislation.
To achieve this, it is important to obtain the best possible advice. The Route – Income provides this service, ensuring that Members have the minimal exposure to risk.
Find out more by telephoning The Route on 020 3141 9040