A7.402 Tax avoidance—what is it and do taxpayers have a right to do it?
What is tax avoidance?
Tax avoidance, in contrast with tax evasion, describes the process by a taxpayer of so arranging his affairs that the amount of tax legally due is less than would otherwise be payable, or a repayment of tax, or increased repayment, is lawfully obtainable. Tax avoidance is legal in that it involves no wrongful concealment of relevant facts. In the UK, the opportunity for tax avoidance has arisen mainly because of the doctrine of form over substance, under which the legal form of transactions is the basis on which the taxing acts operate, regardless of the underlying purpose of the transactions, unless it can be held that the legal form is no more than a sham (see A2.115–A2.116). This view is increasingly shifting towards its reverse — ie the doctrine of substance over form and is widely referred to as the 'Ramsay principle' (see below).
HMRC defines tax avoidance as 'bending the rules of the tax system to gain a tax advantage that parliament never intended'1.
In relation to disputes, HMRC says that those 'who engage in tax avoidance should not gain a tax advantage during the period from the tax due date to the time when we complete our enquiries and resolve any dispute'2.
The taxpayer's right to avoid tax
There is no lack of judicial dicta emphasising the right of the taxpayer to avoid tax. Lord Clyde, the Lord President of the Court of
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