Those of you that know me, realise that I'm sad enough to think that tax planning is very important. I have blogged on this subject before but, at the risk of boring people, the recent media coverage of the use of tax schemes by 'selebs' to avoid tax has prompted me to spout forth again.
The first point I want to make is that all the schemes, such as those supposed to have been used by Jimmy Carr and Gary Barlow, are extremely complicated. The only people that suggest that they are straight forward are either journalists, looking for a headline, or people promoting the scheme. If they were as easy, as is suggested, they would be more wide spread. In the main, they rely on an interpretation of the tax legislation and a 'paper trail' that needs to be followed religiously, if they are to work.
The second point is the idea put forward, mainly by the media that they are only for the fabulously wealthy. This is probably closer to the truth, as many of the schemes have an up-front fee, for implementing the planning involved. However, there are equally many schemes where any fee cannot be described as only for the rich and are open to anybody, who has a need.
The third point is the suggestion that HM Revenue Customs are doing nothing about combating schemes that the Government have branded as ‘morally repugnant’. Just because there is not a swathe of new legislation aimed at the schemes does not mean that they are not doing anything. As stated above, schemes rely on interpretation of the tax legislation and HMRC may well consider that existing legislation is sufficient, given their interpretation of it. Take as an example a tax scheme that was implemented in the 2010/11 tax year. HMRC would not necessarily know of it until as late as 31 January 2012 and then might simply raise an enquiry to keep the matter open until the Courts decide, which interpretation is correct – probably many years later.
When you sit down with a client, to explain that they are not simple or necessarily cheap and they will not know whether they have been successful for a number of years, many loose interest. Add to this the possibility of bad publicity and there will be less interest but some will want to proceed. I do not see it as a moral problem for me to make clients aware of these schemes as long as this stops short of promoting the scheme involved. Surely it is only best practice to make clients aware of what is possible and to explain the pros and cons of each option. The client is then able to make an informed decision.
