TAX AVOIDANCE STRATEGY

Tax avoidance strategy

Tax avoidance strategy

Introduction

The purpose of this study is to expand the boundaries of our knowledge by exploring some relevant information relating to the analysis of UK system of taxation. Tax avoidance is to do everything possible to avoid paying the tax. The richest and largest companies have several ways to reduce their taxes. It is not illegal, but it is a process that deprives the state of a material amount of tax. The tax avoidance is a legitimate tax reduction through tax planning or through the use of legal provisions. Unlike most other countries, the majority of tax professionals in the UK are accountants rather than lawyers. The main promoters of tax avoidance schemes are the large accounting companies and major financial services groups. There has never been a general anti-avoidance rule for corporation tax. However, the latter inherited an anti-avoidance rule from income tax on securities transactions, and since then several anti-avoidance rule has been added to it. The Finance Act of 2004 introduced rules requiring disclosure of information to the promoters of certain tax avoidance schemes. Taxpayers who use these schemes must disclose their use even when they present their own tax returns (Slemond, 2006, pp. 1-15).

In this paper, the author will examine the key factors which influence the formulation of tax strategy in a particular area. The author will provide an in-depth appraisal of the Government's approach to tax avoidance in the UK. Focused and justified analysis will be provided in respect of the need for further reform in the light of the challenges of tax avoidance.

Discussion & Analysis

The UK Government has faced a number of problems with the structure of its corporate income tax, including judgments of the European Court of Justice, according to which aspects of structure are incompatible with the Treaties of European Union. Even tax avoidance schemes on the market by the financial sector proved to be a source of irritation, and were taken through a complicated anti-avoidance legislation.

Recently, the HMRC has proposed and implemented new schemes to tackle the issue of tax avoidance. New measures have been adapted to stop those people who manipulate the rules to get an unmerited tax advantage. The statistics issued by HMRC shows that the gap between the tax owed and tax collected has widen up, and the major responsibility of this gap relies upon the tax avoidance amount that has amplified in recent times (Melville, 2012).

The new schemes proposed by HMRC are focused to create awareness among those people who are involved in tax avoidance activities without the fear of getting caught by the concerned authorities. For the purpose of attaining tax savings, people often get involved in utilizing tax avoiding schemes and ends up wasting on a scheme that does not work. Moreover, this activity also activates the authorities to conduct an in dept investigation of accounts of the person who get involved in tax avoidance schemes.

The tax system in the UK provides a double level of taxation: ...