How to use professional connections to do succession planning
By Mark Battersby, 9 Jun 16
In the first of a series looking at wealth and succession planning from a legal perspective, Edward Stone, partner at Irwin Mitchell Private Wealth, explains how lawyers and investment advisers can work together to ensure their clients’ wealth and succession objectives are fully met.
I must be compliant, I shall be compliant, I am compliant
Privacy has been substantially eroded with new disclosure regimes including the Common Reporting Standard (CRS) introduced in the name of preventing tax evasion, aggressive tax planning and money laundering and data leaks are becoming more frequent, with the Panama Papers being the latest and largest example.
This erosion affects those who are tax compliant as much as those who are not.
The distinction between tax evasion (illegal) and tax avoidance (legal) has been blurred with the introduction of new laws aimed at prohibiting aggressive tax avoidance:
- Tax evasion is illegal and occurs where information is deliberately omitted, concealed or misrepresented to reduce tax liabilities.
- Tax avoidance is bending the rules to gain a tax advantage and 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 planning involves using tax reliefs for the purpose for which they were intended such as, for example, claiming tax relief on capital investment, saving in a tax-exempt Isa or saving for retirement by making pension contributions.
Thus in the United Kingdom, HM Revenue & Customs has made clear it will challenge schemes “on behalf of the vast majority of taxpayers who play by the rules and pay their share” and shut down various schemes which were found to have abused the rules on tax relief.
The Eclipse case made headlines as celebrities were amongst investors in a film partnership ruled to be an aggressive tax avoidance scheme. The investors unsuccessfully took their case up to the Supreme Court and now face substantially larger tax liabilities than if they never participated, estimated at between four and six times their original stake.
The penalties are not limited to unpaid tax, interest and fines: in September 2015, three investment advisers and an accountant were jailed in the UK as the architects of schemes which were determined to be fraudulent tax evasion.
It is imperative that all tax mitigation should be legal, compliant and stand up to public scrutiny.
Tags: HMRC | Irwin Mitchell
