Tax planning and tax avoidance

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A recent High Court ruling (Mehjoo V Harben Barker) apparently imposes on practitioners a contractual duty to help clients avoid tax by any legal means.

In the case damages of £1.4 million were awarded after the defendants were found to be professionally negligent by failing to highlight a tax saving method for a chargeable disposal of a business.

Controversially the method of tax saving was one that HMRC now consider abusive and has been closed on the basis that it constituted a ‘loophole’.

The situation is further complicated by the fact that HMRC now has available a statutory general anti-abuse rule that will penalise clients and their advisors for ‘abusive’tax planning. Thus practitioners must consider the fine line between tax planning and tax avoidance and how to avoid being caught between the two stools of professional negligence litigation on the one hand and censure under the general anti-avoidance rule (GAAR) on the other.

For futher information please speak to John Elliott, Tax Partner