Commentary

V7.102 VAT planning/avoidance/abuse of rights/evasion

Part V7 Tax planning
Part V7 Tax planning | Commentary

V7.102 VAT planning/avoidance/abuse of rights/evasion

Part V7 Tax planning | Commentary

V7.102 VAT planning/avoidance/abuse of rights/evasion

It is often argued that there is a continuum from legitimate VAT planning at one end to evasion at the other. This may often be the case, but the point at which planning or avoidance strays into the evasion area is not clear-cut.

The distinction between avoidance and evasion

It is generally considered that VAT avoidance is legal, whilst evasion is illegal. On the face of it, however, UK legislation appears to take a slightly different view; VATA 1994, s 60 (dishonest conduct — now largely repealed but still applicable in certain cases) and VATA 1994, s 72(1) appear to indicate that evasion only gives rise to a penalty where a person's conduct is either dishonest or fraudulent. This implies that there is such a thing as honest evasion; for a further discussion of this point, see V5.341.

Even if it is allowed that the legal/illegal distinction between avoidance and evasion does exist, it does not mean that there is a clear divide between the two. The then Director of the Anti-Avoidance Group in HMRC, Chris Tailby, said (Tax Journal, 23/8/04):

It may be tempting to 'dress up' avoidance schemes in an attempt to give them a veneer of commerciality to disguise the real purpose. But this is a dangerous game and raises the stakes for the company and its adviser to what is a

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