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What does “tax avoidance” really mean?

3rd Apr 2023
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Traditionally, there was a clear bright line between tax evasion (illegal) and tax avoidance (legal). This has changed, with some commentators blithely referring to legal tax avoidance as “tax evasion,” whilst “tax avoidance” itself is now thought widely to describe an activity that no honest person should take part in. What's the latest?

image of the words tax avoidance
Adobestock

In between then and now, there were briefly both “acceptable tax avoidance” and “unacceptable tax avoidance” but a successful public relations campaign (emanating both from politicians and HMRC) has placed it in the general mind that “there is no such thing as acceptable tax avoidance”.

Football focus

Part of that public relations campaign (enthusiastically supported by the media) consists of vilifying celebrities who take part in “tax avoidance”, which leads one to wonder how Gary Lineker is feeling about his recent victory in the First-tier Tribunal. Very briefly, Mr Lineker took up presenting roles with both the BBC and Sky Sports. He could have been employed by both organisations but chose (was advised) to sign up via a partnership (consisting of Mr Lineker and Danielle Bux, his ex-wife). Because Mr Lineker signed the contracts himself, the IR35 legislation did not apply, so the tribunal allowed the appeal without considering whether there ought to have been an employment relationship.

Avoidance of NI contributions

At first glance, the only “tax avoidance” here seems to be the “avoidance” of employers' NICs by the BBC and Sky and that should not reflect badly on Mr Lineker (except insofar as he agreed to go along with the arrangements). However, the insertion of the partnership turns out to have been an inspired way of misleading HMRC into going after Mr Lineker under IR35, instead of simply alleging that the contracts were in reality direct contracts of employment. It is not clear whether Mr Lineker has even paid any less tax under this arrangement and it does not appear “unacceptable” at all. However, looked at in the round, the entirety of the arrangements can fairly be described as “tax avoidance”.

The point here is not to criticise Gary Lineker, who appears to have done nothing wrong. Instead it might be helpful if the media were to consider, for once, whether “tax avoidance” is always “A Bad Thing” and use that experience to pursue better justified witch hunts in future.

P.S. It really doesn’t help when HMRC announces consultation on a new criminal offence at Budget 2023 “for promoters of tax avoidance who fail to comply with a legal notice from HMRC to stop promoting a tax avoidance scheme”. The sort of schemes this is aimed at are not “tax avoidance” at all – they are mass frauds disguised as tax avoidance. By calling these schemes “tax avoidance” in the context of a criminal offence, HMRC is seeking to make an unacceptable and wildly misleading connection in the public mind between avoidance and criminality.

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