What's the difference between evasion and avoidance?
See HMRC tax gap material linked from post 127. Chapter L of the methodological annex explains the difference between behaviours in some detail. Great bedtime reading!
To summarise, the different behaviours are
Criminal attacks - co-ordinated and systematic attacks by criminal gangs, such as smuggling
Evasion - registered taxpayers deliberately omit, conceal or misrepresent information in order to reduce their tax liabilities
Hidden economy - undeclared economic activity; subdivided into 'ghosts' where the entire income source is unknown to HMRC, and 'moonlighters' where some of the income source is known to HMRC but there are other income sources which are not. (Differs from tax evasion which is a declared source being deliberately understated)
Avoidance - exploiting the rules to gain an unintended tax advantage, often involving contrived or artificial transactions. Includes base erosion and profit shifting across international borders
Legal interpretation - where interpretation of how the law applies to the facts of a particular case differs between HMRC and the taxpayer
Non-payment - tax debts written off e.g. because of insolvency
Failure to take reasonable care - where the taxpayer has been careless or negligent in recording their transactions and/or preparing their tax return
Error - mistakes in tax calculations
I quote directly below in respect of avoidance specifically:
"Tax avoidance is not the same as tax planning. Tax planning involves using tax reliefs for the purpose for which they were intended. For example, claiming tax relief on capital investment, saving in a tax exempt ISA or saving for retirement by making contributions to a pension scheme are all forms of tax planning." (Methodological Annex page 42)
So, if you argue you are avoiding tax by having an ISA, then you must accept you are also avoiding tax if you are in a pension scheme!
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