---

Tax Avoidance

Answer

Her Majesty’s Revenue and Customs (HMRC) distinguish between tax avoidance and tax planning. Tax avoidance is bending the rules of the tax system to gain a tax advantage that Parliament never intended. It often involves contrived, artificial transactions that serve little or no purpose other than to produce a tax advantage. It involves operating within the letter – but not the spirit – of the law. Tax avoidance is not the same as tax planning. Tax planning involves using tax reliefs for the purpose for which they were intended. For example, claiming tax relief on capital investment, saving in a tax-exempt ISA or saving for retirement by making contributions to a pension scheme are all legitimate forms of tax planning. While such actions may reduce the total amount of tax paid, they are not tax avoidance, because they involve using tax reliefs in the way that Parliament intended when it passed the relevant legislation.

Secondary information

Type

Written question

Reference

HL4794

Session

2014-15

Subjects

Tax avoidance

Link

View this Written question on www.parliament.uk