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BKL Tax news 
Looking to save tax? What about tax schemes?
This is a busy time of the year for sellers of tax schemes. By this we mean not bespoke planning but more or less artificial structures devised to give a “quick fix” or investments which are given an extra fillip by tax efficiency. It’s the time when you can expect to get mailshots (not from us!) saying things like “Get a Huge Cheque from the Taxman” or “Pay No tax” or even “We can claim back all the tax you’ve paid for the last Three Years”.
A good rule of thumb when it comes to tax schemes is that if it seems too good to be true it usually is: schemes which reliably make your tax liability disappear in a puff of smoke are like hens’ teeth. But “usually” isn’t the same as “always”, of course: and you may strike lucky. It’s just that backing a winner in the “Aggressive Tax Schemes Steeplechase” isn’t much easier or more scientific than backing the winner in the Cheltenham Gold Cup (did you succeed?)
We don't devise or sell artificial "off-the-peg" schemes and we don't normally recommend them. This isn't because of any moral objection to tax avoidance: it's simply because we think that it is nowadays seldom in a client's best interests to get involved in highly artificial schemes. Consider:
- Can you live with the uncertainty of not knowing what your tax will be?
- Are you prepared to suffer perhaps years of delay before you know whether a scheme works?
- Can you afford to pay the interest which will be charged if the scheme is successfully challenged?
- Do you want your card marked as a serious tax avoider?
- Are you prepared to commit to the scheme provider's costs with no guarantee of success (although part of the fee may be contingent on success, fully contingent fees are a rarity)?
If the answers are Yes to all of these, go ahead. We take trouble to keep abreast of what is available and we can even introduce you to scheme promoters if you want to know more.
There are of course much less aggressive schemes with correspondingly modest benefits. Investment into an LLP-based scheme will usually generate an initial tax repayment albeit that this is likely to be recovered in part – in effect – over the life of the LLP. And such schemes will usually require you to commit at least ten hours a week to the LLP business for at least six months. Alternatively, a subscription of shares under the Enterprise Investment Scheme may allow you to claim tax relief of up to 20% and to defer recognition of Capital Gains. Investment into a Venture Capital Trust may give you up to 30% tax relief (but no CGT deferral). And in either case any capital gains subsequently made on the investment are potentially tax-free. But neither an EIS nor a VCT (nor an LLP come to that) should be regarded as by any means a risk-free investment.
For advice on tax planning, whether outrageously aggressive, intermediate or gentle, please contact your usual contact partner.
