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Tax Avoidance Is Just Good Tax Planning

There’s no such thing as tax avoidance, or why Ken Dodd got laughs and Jimmy Carr got heckled.

“When I use a word,” Humpty Dumpty said…, “it means just what I choose it to mean”

You can’t pick up a newspaper or watch the news these days without seeing a story about ‘tax avoidance’. It’s portrayed as wrong, morally dubious or somehow ‘getting away with something’. But what do they mean by ‘tax avoidance’?

Tax evasion is easy enough to understand. It’s breaking the law so that a company or individual doesn’t pay tax that ought to be paid. But ‘tax avoidance’? As far as I can see, if you aren’t breaking the law you must be following it. So how can that be wrong? If you are driving at 50 mph in a 40 mph zone you are breaking the law and subject to a speeding-fine. But if you are driving at 39 mph in a 40 mph zone you are following the law. No-one will accuse you of ‘speeding-fine avoidance’.

The Ken Dodd/Jimmy Carr shift

There’s no doubt there’s been a shift in the way tax is viewed by politicians, in the media and so by the public. I call this the Ken Dodd/Jimmy Carr shift. Both were popular comedians of their time.

In 1989 Ken Dodd was charged with tax evasion. Note that; tax evasion. There was little doubt that Dodd had not paid tax on a lot of his income, but the prosecution failed to prove criminal intent and Dodd was acquitted of evasion, although he still ended up paying a lot more tax. The result? Dodd became more popular. He introduced jokes about his tax case into his act, introducing himself as “Ken Dodd, failed accountant” and quipping “Self-Assessment? I invented that”. Audiences loved it. No politician commented on it.

Compare that to Jimmy Carr. His tax affairs hit the headlines in 2012. He was never charged with any criminal act. He took part in a tax planning scheme which his accountants had assured him worked but which the courts decided didn’t. The result? David Cameron, the then Prime Minister, questioned Carr’s morals and Carr was heckled by audiences and forced to apologise.

Politicians needed a scapegoat

So what happened between 1989 and 2012? I know that the financial crisis of 2007/8 did, and the economy suffered, and the government’s finances

Ken Dodd Reacts to his tax bill

took a dive. ‘Austerity’ became a buzzword and if cuts were being made, maybe it was useful for politicians to have a way of deflecting their incompetence. So ‘morality’ was introduced to tax and people organising their tax affairs to pay the minimum legally due (which they have always done) was somehow made to seem shabby and the public were fed a diet of stories which portrayed perfectly legal tax planning as being as bad as robbing a Post Office.

Yet here’s the thing. Who writes those laws? Who sets the rules? The politicians do. And then they complain and whip up a frenzy when people follow them? It’s crazy. If we go back to that road with a 40 mph speed limit, if the authorities want to change the limit to 30 mph, or 20 mph they can. If they want to introduce a toll for using the road, they can. But what they surely can’t do is keep the limit at 40 mph and then criticise people for driving down the road at below the limit, just because they’d like them to drive slower and pay tolls.

• Why pay more?

So, here’s my view. There’s no such thing as tax avoidance. If you’re breaking the law, it’s tax evasion. If you’re obeying the law it’s tax compliance. You have every right to use every law, every allowance every deduction and to plan your tax affairs in any way you wish in order to legally reduce your tax bill to the minimum. After all, do you know anyone who wants to pay more tax than they need to?

If you want to find out how you can legally reduce your tax bill, contact Andrew Carter on 01962 832513 or at andrew.carter@continuum-ltd.co.uk

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