Tax advice and tax planning is an increasingly controversial area of business life. The boundaries between legal tax avoidance and illegal tax evasion have become increasingly blurred in recent years, particularly by repeated reference from politicians to “abusive” tax avoidance which may be legal but which they consider to be immoral.
The introduction of a General Anti Avoidance Rule/ General Anti Abuse Rule or GAAR is designed to combat much of the artificial or abusive tax schemes and reputable accountancy and tax firms are unlikely to offer such schemes for much longer. However, the GAAR will not alter the fundamental rights of taxpayers to arrange their commercial affairs in a tax efficient manner. This right is enshrined in case law. The leading case distinguishing between tax avoidance and tax evasion is the 1936 case of Inland Revenue Commissioners v Duke of Westminster. In that case, the House of Lords found in favour of the Duke, stating that:
“Every man is entitled if he can to arrange his affairs so that the tax attaching under the appropriate Acts is less than it otherwise would be. If he succeeds in ordering them so as to secure that result, then, however unappreciative the Commissioners of Inland Revenue or his fellow taxpayers may be of his ingenuity, he cannot be compelled to pay an increased tax.”
Arguably, it is not just the right of directors to manage their company’s affairs tax efficiently, it is their fiduciary duty. If not, are they really acting in the best interests of the shareholders for whom they are agents? However, if tax planning takes precedence over achieving commercial objectives, the same will be true and so a careful balance must be struck.
At Claritas, our approach to providing tax advice is simple. We don’t sell tax schemes and we don’t let the tax tail wag the commercial dog. Instead, we work with our clients to understand their business and its needs and to assist them to both manage their day to day tax liabilities and to undertake specific commercial transactions in a tax efficient manner. This enables our clients to meet their obligations to all of their stakeholders, including their employees, customers, suppliers and shareholders and the government.
Many of the ways in which we can assist you are detailed elsewhere in the Services section, but some other areas where our advice should add value to you and your business include:
- Tax efficient profit extraction;
- Choice of corporate structure- for instance, would a limited liability partnership better suit your commercial objectives than a limited company or vice versa?
- Maximising capital allowance claims on new and existing assets, including benefiting from enhanced capital allowances for environmentally friendly plant and machinery;
- Loss planning to ensure that losses in one group company are matched to taxable profits elsewhere and that you do not create “stranded” losses which can not be offset against current or future profits;
- Managing capital gains when selling assets; and
- Minimising the incidence of irrecoverable VAT.