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How the rich avoid tax ? (note the question mark)

February 10, 2016
I have been practising tax for nearly 30 years now, and I and my family have done well out of my profession. But I could have done even better….
I suspect that at least once a month for the last 20 years or so, after I had obtained some seniority in the area, I have been:
-asked about an article in the weekend press explaining some supposedly clever tax idea;
-asked about a scheme which a client had heard of from a friend in the golf club;
-seen something on TV about tax planning;
-been sent an anonymised letter/report/Counsel opinion extract on a scheme.
I should have made it my practice to say “I will explain my views on this, but first I will need to charge you £100 plus VAT to do so”.  And then, once the client is contractually committee to paying for my explanation, choose from whichever of the following is appropriate:
A-it’s rubbish;
B-it’s fraud;
C-it’s evasion;
D-it’s the worst type of avoidance
I would probably have to also say “based on the information in the article/outlined; without knowing the full facts; there might be something in the detail” but that would normally be padding. I could have then retired to Andorra, Belize, Cayman, Mauritius, Seychelles, Vanuata with my £100s. Fortunately, I am perfectly happy in Bramhall.
Why am I writing this blog now? Well I could have earned many £100s this week on the back of an excellent Channel 4 documentary “How the Rich Avoid Tax” this week, after which I had several calls from curious clients.
Rich Avoid Tax
And again, the same from two other recent TV programmes, one on the Cayman Islands, one on a small town looking to see if it could offshore.
Town Tax
The programmes were, of course, created for the general public not tax geeks, but in their own way, were well prepared and informative. A bit of conflation here and there of avoidance and evasion, I bit of exaggeration and theatre, but generally good.
Personally, I wish there were no such providers of such schemes. I won’t write which particular letters of ABCD the Channel 4 hidden camera ideas fell into, but both ideas were to my mind one of them. I follow various tax commentators on Twitter (I am a very interesting person) and close to C was one view expressed.
Jolyon Maugham QC commented on the ideas on the Channel 4 programme, and I think he was spot on when saying the salesmen were presenting to an unsophisticated client (or an actor pretending to be an unsophisticated client).  It is hurtful to good tax professionals that clients can be mis-sold in such ways. Clients shouldn’t need to be sophisticated, in the same way that when I visit a doctor, I have the right to expect that he or she will explain things in sufficient detail relevant to my need and capacity to understand.
To be an ABCD, there are typically one or more of:
-lack of ‘wholly and exclusively‘; for a payment to be tax deductible, there normally needs to be arms’ length similarity;
lack of openness with HMRC;
substance: yes, Belize (shown on the Channel 4 programme) may well be a good place to run a company from, but please if so go there (taking your snorkel too if you wish);
commercial rationale and business logic; it sounded like whatever variation of  Remuneration Trust idea was been peddled had both exclusion of the client from benefitting and at the same time inclusion as the principal real beneficiary;
-before you even get into the legislative hurdles like DOTAS, GAAR and the like.
One final thought: maybe I should charge £300; £100 to give a view, £100 to say which letter, £100 to explain why. Then I’d soon be able to fly first class to my sunbed.

From → Taxation

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