HMG and HMRC have developed an unhealthy obsession with tax avoidance (a perfectly legal and perfectly logical practice) in their desperation to raise money to keep the ship of state afloat.
In HMRC's recent consultation document "High-risk areas of the tax code: Relief for income tax losses" (published on 30 June 2011) the phrases "robust defences against avoidance" and "the strategy focuses on preventing tax avoidance before it occurs to protect the Exchequer and increase certainty for taxpayers" appear in paragraph 1.1 on page 4.
Paragraph 1.5 then goes on to say:
"However, loss reliefs that can be used to reduce or eliminate tax on general income or capital gains have regularly been used for tax avoidance purposes."
Avoidance is legal, even though the government (members of which use tax professionals to minimise their tax payments) would like avoidance (except when they are practising it) to be made illegal.
Paragraph 1.6 "HMRC’s internal review has identified the income tax loss reliefs that are most prone to misuse for tax avoidance purposes."
Does HMRC regard avoidance as a crime?
Paragraph 1.8 offers the reader some hope that HMRC have finally realised that tax legislation has become far too complex:
"Continued attempts to prevent avoidance through legislative change have made the legislation unwieldy and complex, meaning there is also some potential for simplification."
However, that hope is crushed by paragraph 2.14 that asks for more legalisation:
"It is desirable, and would be more cost-effective for both taxpayers and HMRC, to have a legislative structure that provides certainty and deters tax avoidance involving sideways loss relief at the outset. This would eliminate the need for HMRC to investigate and litigate each individual case on its particular facts."
HMRC require feedback by 30 September, feel free to let them know what you think of it and also to advise them of the various tax avoidance measures currently used by members of the government, MPs and the companies which they run.
Given the obsession with avoidance, I suspect HMRC would have some rich pickings if it went after our "respected" elected representatives.
Wouldn't that be fun?:)
Tax does have to be taxing.
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