Fifty Schemes of Grey: not S & M, more SME...from a tax avoidance perspective.
Where exactly do SME advisers draw the line between what is considered acceptable in tax planning (white) and that which is deemed aggressive or abusive tax avoidance (black)?
The following summary puts forward some suggestions as to what sort of planning is acceptable and falls into that area between black and white - Shades of Grey. The list is not conclusive as this topic is open for debate and discussion and the debate will surely continue for as long as we all have to pay taxes.
Where exactly is the middle ground for SME owners and their advisers? Note: a masochistic tendency is helpful if you want to get the bottom of the small print of some of the darker schemes available.
| White | Shades of Grey | Black |
|
Legitimate use of reliefs |
Relying on the operation of a relief to work although not in the way parliament may have envisaged |
Channeling money backwards and forwards through complex networks for no commercial reason but to minimise tax |
|
Taking a low salary to minimise NICs |
K2 type shemes: avoiding tax and NICs and IHT. Cease employment in the UK, an offshore vehicle employs you and receives your income which lends it back to you. |
|
Splitting income producing assets with a spouse Creating shares of different classes for family members |
Locating "the spouse" offshore and then splitting your UK company dividends |
Splitting income but retaining control of your assets |
|
Awarding restricted shares to employees and then paying dividends | Disguising bonus payments by awarding employees shares in offshore companies via a series of transactions |
| Making loans to employees | Making large loans to directors (more of a Companies Act issue) |
EBT/EFURBS loan back schemes avoiding PAYE and NICs, with CT and IHT relief |
| Reducing SDLT by just and reasonable reapportionment of a contract | Reducing SDLT by maximising fixtures claims |
Avoiding SDLT by staged completion or buying a house via a company |
| Claiming back tax on legitimate charitable donations | Charities Gift Aiding shop sales receipts |
Gift Aid with no real gift or Gift Aiding using worthless shares |
| Claiming reliefs against double taxation when the alternative would be taxpayers paying tax twice on the same income | Structuring your overseas business affairs with the intention of maximising the benefits of double taxation relief |
Devising a scheme using different offshore vehicles which has no other commercial benefit other than maxing out on double taxation relief |
| Providing employees with tax free benefits such as lunch and phones |
Salary sacrifice schemes |
Contrived employment liabilities and losses |
|
Investment in SEIS and EIS Claiming loss reliefs when trading or disposing of assets
|
Enhanced planning to enhance losses by watching timings, accounting periods and capital expenditure |
Schemes which create artificial losses - for sideways or capital loss relief |
| Not paying tax on your pension contributions | Planning with EFURBs |
Pensions schemes artificial surplus |
| Setting up a trust | Setting up a benefits trust for employees but using it to lend money to you and your family | Facilitating the creation of a trust to be settlor and then living off "loans". |
| VAT flat rate scheme | Business splitting or supply splitting | VAT artificial leasing |
