There’s been a lot of talk in the media about tax these last few days. The Times has been headlining on tax avoidance schemes including the K2 scheme being used by Jimmy Carr. Last night on the news David Cameron said he felt that this scheme was “morally wrong”http://www.bbc.co.uk/news/uk-politics-18521468
I contrast Jimmy Carr said “ I pay what I have to and not a penny more” which means he hasn’t broken any laws.
Surprisingly, I’m with Labour leader Ed Miliband (never thought I’d say that!) who said: “I’m not in favour of tax avoidance obviously, but I don’t think it is for politicians to lecture people about morality. I think what the politicians need to do is – if the wrong thing is happening – change the law to prevent that tax avoidance happening”
So now the Government have created a massive moral dilemma for tax advisers. My role is to keep my client’s tax bills down whilst guiding them safely through the legal maze of tax. UK tax is incredibly complicated and it is full of elephant traps for the unwary and grey areas where the correct tax position is a matter of professional judgement.
I may prefer not to use ultra low tax schemes personally because I feel that is reducing my tax bills too far, but do I have a right or a responsibility to insist my clients take the same moral stance?
If we are going to condemn people who choose a convoluted path through the tax maze and emerge with a very low tax bill at the other side, what are we going to do about the innocent victims who unfairly pay far more tax than is possibly fair on a transaction simply because they unwittingly chose the wrong path through the maze?
If paying tax has suddenly become a moral maze then who sets the guidelines? Because, clearly, not all tax avoidance is considered “immoral”
Putting money in an ISA, investing in a pension, giving money to charity
Putting savings/property into your wife’s name to save higher rate tax or Salary sacrifice schemes for pensions or childcare or training
Flipping your PPR exemption to your second property to save CGT
Owner/directors of small businesses draw low salary and dividends to avoid NI
Selling your goodwill to a company at 10% and drawing it back as a directors loan
Converting income to a tax-free loan using a scheme such as K2
Where would you draw the line?