Fare evasion or avoidance?

[Busaholic]

I don't know whether this subject has come up before, and, if it has, apologies in advance, but we are always being told that tax evasion is criminal but tax avoidance is legal. This has always seemed a somewhat semantic view to me, but then I've never been in a high-earning bracket. Is there a similar distinction between fare evasion, which we hear a lot about on here, and fare avoidance i.e. can the latter be said to exist and, if so, what legal status does it have? I do have an in-law in the higher echelon of tax lawyers, but I'm not proud of it!

 

[najaB]

Is there a similar distinction between fare evasion, which we hear a lot about on here, and fare avoidance i.e. can the latter be said to exist and, if so, what legal status does it have?

Two words: split ticketing.

 

[crehld]

Two words: split ticketing.

I don't think this would fit the OP's comparison with tax avoidance given split ticketing is well publicized and unequivocally codified and permitted by the NRCoC. On that basis you may as well say the £10k personal tax free allowance is a form of tax avoidance, which, of course, it clearly isn't.

 

[najaB]

I don't think this would fit the OP's comparison with tax avoidance given split ticketing is well publicized and unequivocally codified and permitted by the NRCoC. On that basis you may as well say the £10k personal tax free allowance is a form of tax avoidance, which, of course, it clearly isn't.

Tax avoidance is using perfect legal but less obvious methods to pay less tax than would otherwise be payable. Split ticketing is using perfectly legal but less obvious ticket combinations to pay a lower fare than would otherwise be due.

 

[bb21]

Using Southern Only tickets on GatEx/Thameslink services may be a possible example depending on your perspective: grey area, strong arguments for, and strong arguments (even moral arguments) against.

Those Scottish £1 tickets another: massive loophole, nought the party losing out can do, and possible moral arguments against.

 

[Clip]

I don't know whether this subject has come up before, and, if it has, apologies in advance, but we are always being told that tax evasion is criminal but tax avoidance is legal. This has always seemed a somewhat semantic view to me, but then I've never been in a high-earning bracket.

You don't have to be in the 'high earning ' income bracket to legally avoid paying tax on your income. You may be doing so without being aware of it through your pension.

 

[Bletchleyite]

Tax avoidance is using perfect legal but less obvious methods to pay less tax than would otherwise be payable. Split ticketing is using perfectly legal but less obvious ticket combinations to pay a lower fare than would otherwise be due.

Yes, I would agree, they are similar.

 

[crehld]

Tax avoidance is using perfect legal but less obvious methods to pay less tax than would otherwise be payable. Split ticketing is using perfectly legal but less obvious ticket combinations to pay a lower fare than would otherwise be due.

I still find myself in disagreement.

Firstly I'm not convinced by your definition of tax avoidance, which I believe falls into the trap of 'concept stretching'. Just because something is less obvious doesn't make it a case of avoidance. Let us examine HMRC's definition of 'tax avoidance', which is certainly more definitive than (although, admittedly, probably not the most definitive) the definition you've offered:

Tax avoidance is bending the rules of the tax system 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 a tax advantage. It involves operating within the letter – but not the spirit – of the law.

So it is not about obviousness at all, but rather using the 'letter of the law' for something not intended.

Split ticketing is explicitly stated as a legitimate exercise in the NRCoC. Indeed, it's active inclusion here is clearly intentional (the condition - which is well crafted and has survived many revisions of the NRCoC - would not exist if it were not) and therefore falls within the scope of being both in the spirit as well as the letter of the NRCoC.

If there were no mention of split ticketing in the NRCoC, but equally it was not expressly forbidden either, then I would agree that it might be comparable to tax avoidance. But, of course, this isn't the case.
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Using Southern Only tickets on GatEx/Thameslink services may be a possible example depending on your perspective: grey area, strong arguments for, and strong arguments (even moral arguments) against.

Agreed these would be comparable examples.
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You don't have to be in the 'high earning ' income bracket to legally avoid paying tax on your income. You may be doing so without being aware of it through your pension.

Quite. If we were to adopt najaB's all encompassing definition of tax avoidance then anyone who has an ISA, makes a gift aid donation to charity, qualifies for a higher personal tax allowance, gets national insurance credits while on maternity pay or state benefits, etc., etc. are all benefiting from less obvious parts of our tax code and are therefore engaged in tax avoidance.

 

[yorkie]

Using Southern Only tickets on GatEx/Thameslink services may be a possible example depending on your perspective: grey area, strong arguments for, and strong arguments (even moral arguments) against.

I can think of strong moral arguments for using them, but none against... I'm strongly against GTRs morally wrong FUD principles.

Obviously they are valid, as per CyrusWuff's post in Govia Thameslink Railway: Issues regarding ticket validity across brand.

 

[sheff1]

Those Scottish £1 tickets another: massive loophole, nought the party losing out can do, and possible moral arguments against.

Agreed these would be comparable examples

I do not see how buying and using a ticket which has been offered and actively advertised by ticket sellers for more than 6 weeks can be called either fare avoidance or a loophole.

 

[najaB]

Quite. If we were to adopt najaB's all encompassing definition of tax avoidance then anyone who has an ISA, makes a gift aid donation to charity, qualifies for a higher personal tax allowance, gets national insurance credits while on maternity pay or state benefits, etc., etc. are all benefiting from less obvious parts of our tax code and are therefore engaged in tax avoidance.

If any of the above are done with the sole and express purpose of reducing the tax burden, then they are tax avoidance. What else could you call it?

 

[crehld]

I do not see how buying a ticket which has been offered and actively advertised by ticket sellers for over a month now can be called either fare avoidance or a loophole.

I was actually referring to the Southern Only ticket, but hadn't cut bb21's post properly when quoting it. Of course the fact the ticket has unintended consequences doesn't make it any less valid, in my view.

 

[yorkie]

I i.e. can the latter be said to exist and, if so, what legal status does it have?

You define it and then we can give you the legal status!

I avoided the York-Donny fare a couple of weeks ago by getting a lift to Adwick and getting a ticket from there to Donny.

I avoided the Edinburgh-Inverness fare by getting a ticket from Tweedbank to Kyle of Lochalsh.

I avoided the York-Liverpool fare by getting a ticket from York-Manchester and another from Manchester-York

I avoided the first class fare by purchasing a standard ticket and a weekend first upgrade.

I avoided the cost of individual journeys by purchasing a Travelcard.

I avoided the cost of York-Carlisle by purchasing a ticket from Marton-Wigton (which had, at the time, a mapped route via York), which caused amusement to the RPI who had "not heard of either place".

Which of these (if any) meets your criteria?

How can we give the legal status of something that has no definition?

 

[crehld]

If any of the above are done with the sole and express purpose of reducing the tax burden, then they are tax avoidance. What else could you call it?

Every living person in the UK, including children, have a personal tax free allowance of £10k ish, the sole and express purpose of which is to reduce the tax burden. Are we all tax avoiders? Using an intended and sanctioned scheme (like a personal tax allowance, or split ticketing) does not constitute a case of 'avoidance' in my view, nor indeed, following the definition quoted above, in HMRC's.

 

[najaB]

Every living person in the UK, including children, have a personal tax free allowance of £10k ish, the sole and express purpose of which is to reduce the tax burden. Are we all tax avoiders?

No, because you don't have to 'do' anything to get it.

Using an intended and sanctioned scheme (like a personal tax allowance, or split ticketing) does not constitute a case of 'avoidance' in my view, nor indeed, following the definition quoted above, in HMRC's.

HMRC's definition encompasses extreme tax avoidance, but putting money into an ISA so that you don't pay tax on it is a perfectly legal and moral way to 'avoid' paying tax on it. I don't see what other verb you could use?

 

[Clip]

With regards to 'avoiding paying the correct fare for your journey' by using routes and split tickets are perfectly legal as the railway itself sells the tickets and enables it to happen - fare evasion is not.

/thread maybe?

 

[crehld]

No, because you don't have to 'do' anything to get it.
HMRC's definition encompasses extreme tax avoidance, but putting money into an ISA so that you don't pay tax on it is a perfectly legal and moral way to 'avoid' paying tax on it. I don't see what other verb you could use?

I think I've figured out the area of contention. "Tax avoidance" is a compound noun that has a very specific meaning, whereas the verb "to avoid" has a very broad definition and can be applied in a number of ways. The two are not synonymous.

By way of a real life example: today I used an advance fare to Birmingham to avoid paying the anytime return fare, but that does not mean I have engaged in 'fare avoidance' akin to tax avoidance.

 

[yorkie]

By way of a real life example: today I used an advance fare to Birmingham to avoid paying the anytime return fare, but that does not mean I have engaged in 'fare avoidance' akin to tax avoidance.

Agreed.

http://www.bbc.co.uk/news/business-27372841

"Tax avoidance is bending the rules of the tax system to gain a tax advantage that Parliament never intended,"

I'd argue that Parliament never intended that rail travel would be as expensive as it is today, and it is the Train Companies who are 'bending the rules' to gain an advantage over passengers in many cases, rather than the other way round.

For example a passenger travelling York-Chinley via Manchester is travelling in a way that was originally intended to be permitted and is therefore NOT engaging in any form of fare 'avoidance'. The Train Companies who attempt to stop us are, in fact not just bending the rules but blatantly breaking them.

 

[najaB]

I think I've figured out the area of contention. "Tax avoidance" is a compound noun that has a very specific meaning, whereas the verb "to avoid" has a very broad definition and can be applied in a number of ways. The two are not synonymous.

I agree that tax avoidance has a very specific meaning. However, not all tax avoidance is morally questionable.

Unless you are saying that companies and individuals should pay more tax than they are liable for, rather than take advantage of schemes and rules that specifically allow them to reduce their tax burden?

 

[yorkie]

Unless you are saying that companies and individuals should pay more tax than they are liable for, rather than take advantage of schemes and rules that specifically allow them to reduce their tax burden?

That's not tax avoidance by HMRC's definition.

So, I take it we're dealing with subjective terms? The discussion can never come to any sort of conclusion or consensus in that case!

 

[najaB]

That's not tax avoidance by HMRC's definition.

Theirs isn't the only definition.

So, I take it we're dealing with subjective terms? The discussion can never come to any sort of conclusion or consensus in that case!

No, it can't! But that's half the fun.

 

[bb21]

Obviously they are valid, as per CyrusWuff's post in Govia Thameslink Railway: Issues regarding ticket validity across brand.

Being valid, hence legal, is a pre-condition for qualification as a comparable example.

The rest all depend on each individual's perspective. One person's comparable example is to another apples and oranges.

I'd argue that Parliament never intended that rail travel would be as expensive as it is today, and it is the Train Companies who are 'bending the rules' to gain an advantage over passengers in many cases, rather than the other way round.

That may be true, but whether true or not, it makes little difference in this discussion imo.

This discussion, to be comparable, should be solely restricted to practice under the current framework for fares and ticketing. Whether the system itself has flaws is a completely different beast, just like the tax regime. I guess I may be straying off topic here.

 

[yorkie]

Being valid, hence legal, is a pre-condition for qualification as a comparable example.

The rest all depend on each individual's perspective. One person's comparable example is to another apples and oranges.

I can't argue with any of that
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Theirs isn't the only definition.
No, it can't! But that's half the fun.

True!

Though, going back to the original post, the "what legal status does it have?" question cannot really be answered if we don't know what "it" is in the first place!
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I don't know whether this subject has come up before...

It's cropped up in other threads but here's the other thread we had which was dedicated to the subject: Reducing fares legitimately - akin to tax avoidance? from September 2013.

There's a lot of interesting reading material in that thread, here's just two (out of many) quotes:

I am happy to practice both legitimate tax avoidance and legitimate fare avoidance

...I think the main difference is that fare reduction is seen as an every-man activity. It's not exclusive - anyone can do it. Whereas many acts of tax avoidance are not open to the average person, and require special employment conditions, or tens/hundreds of millions of pounds in financial resources.

People don't like the rich (companies, people) exploiting their position. Tax avoidance is almost exclusively about the rich getting richer...

 

[bb21]

I do not see how buying and using a ticket which has been offered and actively advertised by ticket sellers for more than 6 weeks can be called either fare avoidance or a loophole.

£1 Anytime ticket for tens or even hundreds of miles not a loophole? Sorry you will have to try harder because that is most definitely a loophole imo. Why would we try and keep schtum about it at the beginning otherwise? Why are loads of people on and off this forum buying them in bulk otherwise, mostly fearing that it may disappear at any time? They were certainly not intended to be priced at that level otherwise the whole revenue model of the industry will fall down.

Just because ScotRail have been very slow in closing it down does not make it any less of a loophole than if they revised the fares immediately upon realisation of their existence. It does not stop it from being valid, however, just like unintended loopholes in the tax system do not stop tax avoidance measures being legal.

 

[yorkie]

£1 Anytime ticket for tens or even hundreds of miles not a loophole?

Someone who lives in Nairn recently actually travelled to Tweedbank and simply bought the ticket from his origin to his destination. There was no other appropriate through fare he could have bought for the route via Aviemore. So the ticket itself is clearly not a loophole...

Sorry you will have to try harder because that is most definitely a loophole imo.

....However if you say that the use of such ticket that is priced at a lower fare, and valid for a longer journey than you intend to make, ie starting & finishing short, is a "loophole" then the £1 tickets are just the tip of the iceberg (see below for another example).

Why would we try and keep schtum about it at the beginning otherwise?

Because the fare seems too good to be true. Whether or not it's used as a loophole.

Why are loads of people on and off this forum buying them in bulk otherwise, mostly fearing that it may disappear at any time? They were certainly not intended to be priced at that level otherwise the whole revenue model of the industry will fall down.

Agreed, but for a while a Hadrians Wall Day Ranger was cheaper than a Newcastle-Carlisle return. Obviously that was not intended, and when Northern increased the price for the latter they obviously forgot to increase the price for the former. So that's also a "loophole" as it's too cheap and was not intended to undercut the ticket with less validity.

But, guess what? I asked for a Newcastle-Carlisle return at that time and was sold the cheaper Day Ranger (which I didn't even know was cheaper!). So ticket clerks will actually offer "loophole" tickets when you don't even ask them to.

The problem here is that "loophole" is subjective. Some people object to the term being used because it may have negative connotations.

If buying a cheaper ticket is a "loophole" then car drivers buying cheaper petrol is also a "loophole"

 

[bb21]

Someone who lives in Nairn recently actually travelled to Tweedbank and simply bought the ticket from his origin to his destination. There was no other appropriate through fare he could have bought for the route via Aviemore. So the ticket itself is clearly not a loophole...

You are splitting hair here, but yes in such circumstances it can be argued that the fare is not a loophole, but simply a mistake. The passenger need not know the intricacies, as long as they are not denied their contractual rights to conveyance. I wonder how many people who bought these £1 fares fit that category. (No, those who bought the ticket to do this trip to take advantage of the erroneous price do not fit into this category imo.)

....However if you say that the use of such ticket that is priced at a lower fare, and valid for a longer journey than you intend to make, ie starting & finishing short, is a "loophole" then the £1 tickets are just the tip of the iceberg (see below for another example).

Of course it is not the only case, otherwise a large section of the forum's traffic simply would not exist.

Because the fare seems too good to be true. Whether or not it's used as a loophole.

Agreed, but for a while a Hadrians Wall Day Ranger was cheaper than a Newcastle-Carlisle return. Obviously that was not intended, and when Northern increased the price for the latter they obviously forgot to increase the price for the former. So that's also a "loophole" as it's too cheap and was not intended to undercut the ticket with less validity.

Yup, can be argued to be a loophole, but also it should be remembered that the line between a loophole and otherwise can be a blurry one at times. Sometimes it is quite obvious, such as the erroneous £1 fare example (for the vast majority of purchasers, if not all, imo), but other times it is much less clear, like this example you gave as I believe the two fares serve completely different purposes since the return were an Anytime fare, so these fares were pretty much intended to be priced at their respective levels. You then have things in between where it is all differing shades of grey

Does this mean at times when the Ranger were valid it became a loophole? I don't know. I only gave examples of what in my opinion were obvious loopholes but even then, as the progression of this thread showed, some people vehemently disagree. What is the definition of a loophole? Maybe someone can try and come up with one but I suspect by its subject nature it would be virtually impossible, especially in fares and ticketing.

But, guess what? I asked for a Newcastle-Carlisle return at that time and was sold the cheaper Day Ranger (which I didn't even know was cheaper!). So ticket clerks will actually offer "loophole" tickets when you don't even ask them to.

I don't see how this is at all relevant to what is being discussed here.

The problem here is that "loophole" is subjective. Some people object to the term being used because it may have negative connotations.

I didn't mean for its usage to have negative connotations. That was very certainly not my intention. (I know this sounds crass but if some people have an issue with the word, then it is not really my problem because the word itself is a fairly neutral one.) If one can find a loophole and make good use of it, good on them. (This even applies to my attitude towards tax avoidance.) I am not in a position to pass judgement on people who do this.

If buying a cheaper ticket is a "loophole" then car drivers buying cheaper petrol is also a "loophole"

I disagree that it is at all comparable, as for a start you are not buying the same items, whatever your intention. Conveyance from A to B is conveyance from A to B (provided that they have the same, or at least similar, routing and operator restrictions). Fuel from one retailer may vary wildly from that from a competitor, or may be the same. I think we are straying off course here.

Also I didn't give a definition for "loophole", because I don't have one. I only know clear cases when I see one, well, clear cases imo anyway.

I wonder how many people would consider it a loophole if you randomly select 100 people from the High Street and show them the £1 fare example, explaining the whereabouts of the origin and the destination.

 

[najaB]

And that's the nature of avoidance (be it Tax or Fare) - there's a continuum from "great idea" though "hmm a little dodgy" right on to "how can you sleep at night?"

Indeed, that is why crehld and I have been at cross-purposes - I see the whole scale as tax avoidance (taking measures to reduce your tax burden) whereas the HMRC definition he's been using concentrates on the more extreme end of the scale.

But the question is - what does 'bending the rules' actually mean? Someone might describe a rich person putting money in trust 'for their children' as 'bending the rules' on income and inheritance tax. Others would call it prudent financial planning.

Similarly with things like split ticketing - there are some splits that are obvious and clearly above board. Then we've all seen splits that have made us go 'Hmm... not so sure about that'. Take the current thread about stopping short on an Advance as part of a split - we've said 'Not technically sticking to the T&Cs but unlikely to get you in any trouble.' Sounds like what people say about Tax Avoidance to me?

 

[Tetchytyke]

You are splitting hair here, but yes in such circumstances it can be argued that the fare is not a loophole, but simply a mistake. The passenger need not know the intricacies, as long as they are not denied their contractual rights to conveyance. I wonder how many people who bought these £1 fares fit that category. (No, those who bought the ticket to do this trip to take advantage of the erroneous price do not fit into this category imo.)

A better example would be the "special offer" East Midlands Trains had from Kent to South Yorkshire last summer. It was obvious that they'd put the decimal point in the wrong place, making the fare £8.90 instead of £89 (or whatever). Those using the ticket (me included) were evading no fare- we paid what they asked us to pay- but I think it's fare to say we were avoiding paying a higher fare by taking enthusiastic advantage of the "special offer".

That's really not so very different from setting tax mechanisms in place to deliberately reduce tax liability.

There's nothing wrong with exploring the use of tickets that allow you to do the same journey at a reduced cost. We might call them "loopholes", we might not. But it's the same motivation as Starbucks chucking all their income through the Netherlands to reduce their UK tax bill. Nothing legally wrong with it, and ethics are always subjective, but a clear gaming strategy.

As for the TOCs, of course they're just as bad, gaming the system every way they can, e.g. setting the "peak time" as starting at 2.59pm, or not allowing off-peak tickets to be used before 9.30am regardless of distance.

 

[simonw]

Tax avoidance is as per the HMRC definition above.

Tax evasion is not paying the rightful tax due. E.g. not declaring interest on your tax return.

Investing in an ISA, putting money in a pension etc are classed as tax planning as they are using the tax system as the legislators intended.

 

[reb0118]

OK I'll throw this into the mix:-

A quiet service regularly operated with two units with no through connection, waiting shelter at the passenger's station is to the rear of the platform adjacent to the unit the guard is in. The exit at the passenger's destination is again to the rear of the platform. There are no facilities to purchase tickets at either station (to keep things simple). The guard normally travels in the rear unit.

Is a passenger who regularly boards without a ticket at the leading unit knowing that he is unlikely to be sold a fare on board travelling legitimately or attempting to avoid/evade their fare?

Discuss.........