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A Zen approach to tax planning

Tax

18/03/2011A Zen approach to tax planning

Blogger Tax Teddy sounds a note of caution on the whole issue of tax planning.

The taxman who stole Christmas

A quick Google around the Web will turn up lots of accountants, financial advisers and others ready to help with tax planning. Many of these will suggest that their fees will be fantastic value in relation to the tax savings.

This may well be so but TaxTeddy would like to sound a note of caution on the whole issue of tax planning.

First some history.

In the good old days when tax inspectors and accountants were gentlemen, any dispute relating to a client’s affairs was discussed, arguments were advanced and countered, and eventually a ‘reasonable’ settlement was made which was fair and acceptable to both sides.

Well, those days are long gone.

The background to any dispute with HM Revenue & Customs these days is that:

tax law is fantastically complex.
HMRC inspectors have targets they are expected to achieve so they are under pressure to ‘get a result’.
tax administration law has been weighted in favour of HMRC - they hold all the cards, and they know it.

So the likely outcome of an investigation is that a point will be reached where the client either pays up (plus interest and penalties) or goes to court, with all the cost that entails.

All this is set against a background of Treasury coffers severely depleted and HMRC as an organisation under increasing pressure to collect more tax.

Now this is not to say that HMRC investigations can never be overcome. They certainly can and there are some very good specialist accountants who will defend an investigation with great skill.

But the point is, the more aggressive your tax planning, the greater your risk of enquiry by HMRC. So, tax planning should really be about attitude to risk. Remember that when you are thinking of signing up for the latest tax avoidance scheme.

And finally, just to show that anyone can get caught up in a tax scheme fight with HMRC, have a look at "Stars face massive payback demands as HMRC probes £2bn film tax loophole".

TaxTeddy is a director of a small tax consultancy and he has created a blog to share his insights into UK tax law and practice. By cutting out the jargon TaxTeddy hopes to give his readers a better understanding of what is happening in tax administration in the UK, and sometimes other countries too.

You can find tax information especially for expats on the Expat FAQs page of the Cambridge Tax Practice website.

Tax Teddy / LB / Expatica