BigTim wrote:hiriskpaul wrote:BigTim wrote:hiriskpaul wrote:I would not say I was "prioritising IHT avoidance", which would actually be illegal if taken literally.
it would not. Avoidance is legal, evasion is illegal. Using an ISA is a legal CGT avoidance strategy
Not according to the HMRC.
Tax avoidance:Tax avoidance involves bending the rules of the tax system to try to gain a tax advantage that Parliament never intended.
It often involves contrived, artificial transactions that serve little or no purpose other than to produce this advantage. It involves operating within the letter, but not the spirit, of the law.
https://www.gov.uk/guidance/tax-avoidan ... troduction
Investing in an ISA, a Parliament approved tax saving device is not tax avoidance. Neither is paying money into a pension, participating in an EIS, making CGT free gains on gilts/QCBs, buying premium bonds or giving to charity.
Edit: more to the point, stopping working because you have had enough of it and have become financially independent is not tax avoidance either! Although you will pay less tax.
Er yes according to HMRC, you said that if it were tax avoidance it would be illegal, but you've quoted something that says it's legal
It's always been the principle that one may arrange one's affairs however one sees fit to legally minimise the tax paid and I take the point that schemes specifically created by the govt with the intent of encouraging people to allocate capital in a particular way, with the incentive of avoiding tax (VCTS, ISAs, EIS etc) are not considered "avoidance" by HMRC.
It's that "contrived" bit that's key. Because investing in a film scheme was certainly not tax avoidance (the film tax credits were set up to encourage investment in the film industry just like EIS and other govt incentives). Until it definitely was because the schemes were being "contrived"
I remember many years ago (when I contracted through a ltd company) being contacted by an accountant very eager to get me to use a contrived (though perfectly legal, as verified by barristers she was at pains to point out) loan scheme to reduce my tax rate to single digits. I felt it was too convoluted and in addition to a moral consideration, too apt to be attacked by retrospective legislation so I declined despite entreaties. So it proved
https://www.gov.uk/government/publicati ... oan-charge
The schemes remained legal but were taxed retrospectively.
Quite right, I should have said probably ending up illegal.
As you have noticed, the emphasis has changed somewhat from avoidance being legal to avoidance only legal until HMRC say otherwise! And HMRC usually do come down on illegal once they have had a good look at a contrived scheme, regardless of what the scheme's barristers may say. Barristers are very unlikely to give a totally unqualified nod to a tax avoidance scheme in any case. Or very little else in my experience.