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Avoiding tax is not illegal. Most business do this even by paying dividends versus salary for example. Evading tax is. He was avoiding tax.

by bananas 12y ago

james1071 12y ago
What is your point about Jimmy Carr? He stopped using an avoidance scheme once it was reported in the media-noting to do with the HMRC.
swombat 12y ago
It's more complicated than that. He was using a so-called "Registered Tax-Avoidance Scheme" (TAS for short). TAS's are basically entire schemes built around a loophole in the tax law. Each time the government announces a new Budget, they include a raft of measures to try and plug these holes, but there are companies that specialise in finding these loopholes and helping their clients exploit them (for a fairly sizeable fee). They pay some top lawyers to provide a quote that "yes, damnit, the loophole exists", and then they go on their merry dance to acquire clients to make use of those loopholes. As my accountant explained it to me at the time (before I decided to stay the hell away from those things), the difference between regular tax avoidance and registered tax avoidance schemes is that in the first case, you and your accountant think you're paying a fair amount (and HMRC may disagree), whilst in the second case, you, your accountant, and HMRC all know you're playing dirty. Example: one of the more popular TAS's was to set up an employee benefits trust, with you (the business owner) as the beneficiary. Payments to the trust could be seen as staffing costs, thereby attracting no Corporation Tax on profit. The trust would then loan you the money at zero interest and with no expectation of it ever being repaid, thereby avoiding income tax. Bingo - zero tax! But obviously exploiting a hole in the rules. This has been progressively clamped down on - first by requiring people using TAS's to declare that they are using them (which allows HMRC to target them more effectively), and in the latest Budget, by requiring users of TAS's to pay the tax first as if they weren't using the TAS and then argue with HMRC over whether the TAS is valid. I think overall the TAS thing is on the way out... but it's really worth drawing the line between regular tax avoidance (i.e. reducing your tax using very legit mechanisms like capital allowances, R&D tax credits, dividends/salary splits, etc) vs registered tax avoidance schemes, which are just dirty business. As far as I know, Jimmy Carr was using a registered tax avoidance scheme.

Avoiding tax is not illegal. Most business do this even by paying dividends versus salary for example. Evading tax is. He was avoiding tax.

by bananas 12y ago

Avoiding tax is not illegal. Most business do this even by paying dividends versus salary for example. Evading tax is. He was avoiding tax.

james1071 12y ago

What is your point about Jimmy Carr? He stopped using an avoidance scheme once it was reported in the media-noting to do with the HMRC.

swombat 12y ago

It's more complicated than that. He was using a so-called "Registered Tax-Avoidance Scheme" (TAS for short). TAS's are basically entire schemes built around a loophole in the tax law. Each time the government announces a new Budget, they include a raft of measures to try and plug these holes, but there are companies that specialise in finding these loopholes and helping their clients exploit them (for a fairly sizeable fee). They pay some top lawyers to provide a quote that "yes, damnit, the loophole exists", and then they go on their merry dance to acquire clients to make use of those loopholes. As my accountant explained it to me at the time (before I decided to stay the hell away from those things), the difference between regular tax avoidance and registered tax avoidance schemes is that in the first case, you and your accountant think you're paying a fair amount (and HMRC may disagree), whilst in the second case, you, your accountant, and HMRC all know you're playing dirty. Example: one of the more popular TAS's was to set up an employee benefits trust, with you (the business owner) as the beneficiary. Payments to the trust could be seen as staffing costs, thereby attracting no Corporation Tax on profit. The trust would then loan you the money at zero interest and with no expectation of it ever being repaid, thereby avoiding income tax. Bingo - zero tax! But obviously exploiting a hole in the rules. This has been progressively clamped down on - first by requiring people using TAS's to declare that they are using them (which allows HMRC to target them more effectively), and in the latest Budget, by requiring users of TAS's to pay the tax first as if they weren't using the TAS and then argue with HMRC over whether the TAS is valid. I think overall the TAS thing is on the way out... but it's really worth drawing the line between regular tax avoidance (i.e. reducing your tax using very legit mechanisms like capital allowances, R&D tax credits, dividends/salary splits, etc) vs registered tax avoidance schemes, which are just dirty business. As far as I know, Jimmy Carr was using a registered tax avoidance scheme.