Is Tax Avoidance The New Tax Evasion?

If you believed some of the rhetoric coming out of the UK lately you’d probably think that tax evasion and tax avoidance are the same thing? Of course they’re not. One is legal and the other illegal for a start, quite a big difference I’d say.

When one high profile government minister was asked on live TV if he goes out of his way to pay more tax than he possibly could, of course he replied “no”. That is everybody‚Äôs right, to work within the law to reduce your tax burden is being prudent, in fact some would call it common sense. We can’t see that changing in the next 12 months, can you?

This has all come about as the UK government makes a commitment to crack down on people using tax evasion and avoidance. Prosecuting tax evaders is absolutely right. On the other hand cracking down on people who are operating 100% within the law to reduce their UK tax burden seems a curious decision. Not really sure how that’s going to work. As part of this commitment there is mention again of targeting people using trusts as a way of avoiding tax. This of course has a massive impact on the UK contractor market, at the very least it causes a lot of unease and muddies the water on what schemes do and don’t “work”. We couldn’t answer that question, nor would we ever try to. You ask 100 people about any payroll scheme and I’m sure you’ll get 100 different answers. What we can say though is that we have spoken to several EBT scheme providers and it seems as though some are resigned to the fact that their current scheme is very unlikely to be viable after the 2011 budget.

The truth is that whatever the UK government decides to change in legislation will have to be spelled out. There is no room for assumption. Until that is done no payroll scheme provider can guarantee that their solution will still be in operation in 2011. It all depends what is written into law in the 2011 budget, until then it’s very much as you were.

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