Tax Avoidance vs Tax Evasion - Understand the difference

Tax Avoidance vs Tax Evasion are terms that you will have undoubtedly heard over the course of your business journey, however, understanding the differences between tax avoidance vs tax evasion can mean the difference between only paying the minimum amount of tax legitimately, and ending up in hot water for tax fraud.
HMRC Code of Practice Link:
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HMRC Spotlights:
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⏱️ Time Stamps:
0:57 - The difference between tax avoidance and tax evasion
2:51 - What is a tax avoidance scheme and should I use one?
6:29 - What could happen if you evade tax?
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It is perfectly legal to arrange your tax affairs in a way that enables you to pay the minimum amount. This is called Tax Avoidance. In this video we briefly go over some of the ways you can do this, such as holding assets in a spouses name, disposing of assets with a tax year to make use of allowances or even holding cash savings in an ISA to keep them free from taxation.
However, tax evasion is illegally trying to pay less tax than is owed, this could be done by understating or overstating expenses or earnings to HMRC or evening the complete omission of details from HMRC.
As some laws are open to interpretation, many third parties often create Tax Avoidance Schemes which, while operating to the letter of the law, do not operate in the spirit of the law, as described by HMRC. If you are taking part in one of these schemes you must let HMRC know, usually through your self assessment return. HMRC keeps a list of the schemes they are currently investigating in the spotlights section of their website. We've put together 4 tips to help you work out if you may be in one of these schemes are running the risk of potential difficulties from HMRC further down the line.
1. If the scheme insists it's approved by HMRC you should be suspicious. HMRC simply does not approve any schemes.
2. If the scheme suggests you do not have to declare it to HMRC you should again be suspicious as you are legally required to inform HMRC if you are participating in a tax avoidance scheme, usually through your self assessment tax return.
3. If the aim of the scheme appears to be to make your money go round in circles and end up where it started, you should be wary of this.
4. If it sounds too good to be true, it genuinely is. In the video we go over an example where contractors were told they could take home up to 90% of their pay, which ultimately was caught up to by HMRC and repayable.
We hope this video has helped you understand the key difference between tax avoidance vs tax evasion and has taken you one step closer to knowing your numbers. Make sure to subscribe for our upcoming videos on self assessment tax returns, bounce back loans, director loan accounts and many more useful topics to empower the next generation of business owners.
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#taxavoidance #taxevasion

[@tonydCFO]

We all have a desire to avoid tax legally. But when tax avoidance blurs into tax evasion, then things can get tricky! A good understanding of tax avoidance vs tax evasion will help you stay on the right side of the law, without compromising your legal right to sensible tax planning (tax avoidance). Time Stamps: 0:57 - The difference between tax avoidance and tax evasion 2:51 - What is a tax avoidance scheme and should I use one? 6:29 - What could happen if you evade tax?

[@darrenmclaughlin3028]

The Chinese family at cobbold rd Felixstowe ip11 hunter moon area near Tesco’s big tax evaders cbyer criminals from China with big house and bank transfers from there countries with there contacts it’s where they got the property’s

[@marknorman3582]

I did Dotas scheme. The HMRC gives it a number. All ok for years then change their minds. They have no website saying be careful about Dotas. They bonafide with a number. Then the promoter goes bust and the accountant doesn't want to know. Leaving the mug to pay the bill. Bad advice all the way from three lots of experts. Dotas is still being sold and HMRC doesn't warn anyone.😢

[@kimballentyne3482]

Thank you for sharing; very interesting. If two joint executor heirs have NOT included finances and assets from Spain (whilst residing in England) in an English court of law does this fall under tax evasion? Is it compulsory for joint executors to show completed bereavement application forms to close English and Spanish bank accounts? All information is warmly welcome.

[@davidwhatsthatabout7404]

I myself prefer to be tax exempt for the whole year and then pay what I owe by the end of the year. Primarily because 1. I don’t want to get my hopes up thinking my return will be great. And 2. You don’t know what tomorrow holds, so you need every bit of money as you can.

[@ericachristian4012]

I wonder how one survives in a digital world after being charged with tax evasion you can't do anything with your identity. You're facing prison time! Accidents and crimes like this can seriously effect the way a person's personality develops especially if you find you're in a position where you can never be yourself! Fraud is one of the worst crimes to be charged with. I think these tax avoidance schemes sound pretty interesting and imaginable after thinking about the latter crime of tax evasion.

[@befirdumeseret2995]

very great presentation

[@tonydCFO]

Hi Befirdu, thank you for your comment and support.

[@oogiboogieman4465]

Hi, can anyone help me and give me some advice, please, right? I have worked for the same company for around 12 years, and my boss has been paying someone cash in hand and taxing them on it. An argument started, and my boss let slip he was running the cash in hand, wage through me at the accounts. Basically, I'm earning a lot more money. I confronted him, and he said he's been doing it to all the self-employed people, and if i tell the tax man, it would open a massive can of worm and could shut the bissness down so I know he's been up to no could and made money and avoided paying tax for years on me and all the other working lads.what should I do

[@kimballentyne3482]

Perhaps look for another job and/or discreetly inform HMRC.

[@ronjenkijns4743]

Tax avoidance and tax evasion are the same thing. The only difference is that one is legal, but they are both immoral.

[@tonydCFO]

Appreciate your comment Ron

[@nipaparekh1678]

Help ! Are there Any tax avoidance schemes I could use as an employed teacher and I also rent out a property but as I’m on £49,000 income + rental income so am taxed a ridiculous amount as my income is over 50,000!! Any suggestions on reducing tax ?

[@tonydCFO]

Hi Nipa, please go to our Q&A section where you can post this question and get a response (no charge) accountingtaxacademy.com/qa-section/

[@lawrencer25]

Pay your tax 👍👍👍👍 Hopefully you'll get charged 65% for being a dishonest person 🥰🥰🥰🤣🙈

[@felixodjer3432]

super

[@tonydCFO]

Hi Felix, you're welcome and thank you for your support 👍

[@dennishipsley8703]

There IS NO INCOME TAX evasion or even evading "taxes" because Taxable years ended August 16 1954 by LAW! Google 26 CFR 1.0-1 paragraph (d) of the IRC of 1954 clearly says TAXABLE YEARS began December 31 1953 and ended August 16 1954 passed into LAW by the 83rd Congress AS LAW and published AS Volume 68A to the United States Statutes at Large. ...as LAW. ANY Subtitle F compliant enforcement provisions took effect the day AFTER the date of ENACTMENT which was August 17 1954 but on that day there was NO TAX TO ENFORCE AS the tax died expired the day before on August 16 1954. There has NOT BEEN AN ENFORCEABLE LEGAL INCOME TAX in this country for 70 YEARS!!!

[@kimballentyne3482]

Is this only in the USA?

[@Leavemykindalone1154]

Prostitution is illegal too

[@kimballentyne3482]

In many countries prostitution is legal.

[@MegaMissfitz]

Just for the record i meant tax evading! Not masturbating! 😤😤😤