2012 saw tax avoidance hitting the headlines: celebrities involved in schemes to shelter their income, public officials being paid through personal service companies to avoid PAYE, and multinational companies shuffling their profits into different countries to reduce their UK tax bills. The Chancellor has announced a crackdown on avoidance, putting more of HM Revenue & Customs’ resources into tackling the ‘problem’ – and some of the avoiders have taken fright at the publicity and promised to change their ways.
All this raises an old question: what’s the ‘right amount of tax’? Governments create tax reliefs to encourage people to do things – invest in businesses, provide for their old age, give to charity. If you do these things, surely you are being a good citizen, not someone who should be scolded by politicians.
Everyone has to make their own personal decision about how far they will go to reduce their tax bill. This newsletter sets out a number of plans that even HMRC wouldn’t object to – they involve straightforward use of the reliefs that the law provides, for the purpose the law intended. They aren’t the ‘aggressive tax avoidance’ that Mr Osborne attacked in his Autumn Statement. There are ideas here that most people – not just celebrities, or multinational businesses – can use to save tax if they want to. Tax rules change all the time, so plans that have made sense in the past may need to be reviewed. But in any case, we recommend an annual review of your tax affairs to see if you are paying more than is necessary, and if what you have done in the past is still appropriate.
The Chancellor now says we will take until 2018 at least to recover from the economic shocks of the past few years, so we can expect HMRC to be even keener to collect whatever is possible. Under self-assessment, last year’s return must be submitted and the liability settled by 31 January: between then and the end of the tax year (5 April) is a good time to take stock and make sure that you are as well defended against the taxman as you can be.
Of course, the best plans are not hurried – the last day of the tax year, when most plans ought already to have been implemented, is not the best moment to consider them for the first time. If you think ahead and act in good time, you can save money.
Some of the ideas in this newsletter stay the same from year to year; some change a little; some are completely new. This year, the introduction of Real Time Information is a major new challenge. Of course, the precise circumstances of each individual have to be taken into account in deciding whether any particular plan is suitable or advantageous – but these suggestions may give you some ideas. We’ll be happy to discuss them with you in more detail.