Here in the Wealth Management and Taxation department, we love a good tax planning wheeze. However, as we frequently advise clients, there are wheezes and then there are wheezes (by which, I do of course mean opaque schemes that feel a bit icky and seem bound to fail at some point).
Whilst there can be grey area as to the legitimate use of tax legislation, for the most part the advice we (and many) advisors provide is designed to simply, and without controversy, utilise the basic allowances, reliefs and exemptions that are set out in the variety of tax statutes.
In recent years, the government has enacted a series of anti-avoidance legislation aimed at a wide variety of taxes (GAAR, DOTAS, TAAR to name but a few). Broadly speaking, if someone now takes a step which is ‘artificial’ and designed solely to obtain a tax advantage, HMRC can look at, and overturn, that step.
Nevertheless this doesn’t stop people trying and, as the very well-publicised cases of Jimmy Carr and multiple premiership footballers show, we are all well aware when it goes wrong.
Or are we?
Unless you happen to keep an eye on tax news (who doesn’t right?), then you are likely completely unaware that our very own Lord Sugar has recently failed in his bid to dodge a reported £186m tax bill. That is surprising for a few reasons. Firstly Lord Sugar is a well known public figure in the spheres of politics, business and entertainment, so there is a legitimate public interest in his actions. Secondly, the level of that attempted avoidance is several orders of magnitude greater than Jimmy Carr (who looks downright impoverished by comparison).
I am pleased to link to articles by The Bureau of Investigative Journalism and in AccountingWeb that fully detail the story. In Lord Sugar’s defence, his avoidance was not ‘schemey’ per se, he simply planned to leave the Country to avoid liability here. This failed because his seat in the House of Lords prevents him from changing his tax residency like this. What does feel a bit icky is his subsequent statement that he would have given up that seat purely to avoid tax. Nice to know he would happily turn his back on stewarding this Country for a quick buck.
Still, it does go to show the value of good advice. If you are looking for any wealth management and estate planning advice, please do not hesitate contact me directly on 01494 893 533.