Measures to Avoid Unacceptable Tax Avoidance in UK

Running head: MEASURES TO AVOID UNACCEPTABLE TAX AVOIDANCE IN UK
MEASURES TO AVOID UNACCEPTABLE TAX AVOIDANCE IN UK
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MEASURES TO AVOID UNACCEPTABLE TAX AVOIDANCE IN UK
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The recent trends in business incidence of tax avoidance has increased. According to the
information of UK government tax avoidance among the individuals and the well-known
multinational corporations has become the usual scenario. Since tax avoidance is not an act of
crime in the eye of law thus it would be difficult for the government to control the possibility
of tax avoidance. The consequence of tax avoidance is beneficial from the view point of the
tax payer but it is not a positive aspect for the government of any country because it decrease
the amount of revenue earned from tax and distort the economic growth of the country.
Therefore, it can be said that tax avoidance is not only a method to reduce the tax expenses
but also the exploitation of the weakness and loopholes of the rules and regulation of the tax
laws. The study basically defines the measures taken by the government of United Kingdom
to prevent the possibility of tax avoidance and the necessity of the assessment of the GAAR.
There are three most significant ways to reduce the burden of tax rather save the
taxable income such as tax evasion, tax planning and tax avoidance. The most relevant and
legitimate manner of reducing the payment of tax are tax planning and tax avoidance. The
concept of tax avoidance refers to the tactful arrangement of certain incidents that may help
to reduce the liability to pay tax without accepting any illegal ways such as availing the tax
privileges, exemptions and tax rebates (Liu Schmidt-Eisenlohr and Guo 2017). The practice
of tax avoidance reduce the basic purpose of implementation of the rule and regulations of
Tax law. According to the economic condition of a country tax avoidance is regarded as one
of the most drastic situation. Since funds collected thorough implementation of tax on
individuals and business firms is the main source of income for the government to run the
economy of a particular country. Governments spend the amount of tax in different sectors
like social security, education, health, defence, transport, development of industrial sectors,
development of agricultural sectors, establishing proper infrastructure and implementation of
other developmental schemes (Ferry, Eckersley and Van Dooren, 2015). Therefore, in other

MEASURES TO AVOID UNACCEPTABLE TAX AVOIDANCE IN UK
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words tax avoidance is a curse for the prospect and growth of a country (Riedel 2018).
Usually to save the taxable income individuals or the multinational corporations often
introduce the fake and artificial transaction purposefully to curb the rules and regulations of
the law. The scheme of avoiding the payment of tax is not always a boon for the taxpayers,
those who follows the trick to save the taxable income often end up by paying more along
with fines and penalties. According to the report produced by UK Houses Of Commons
Committee of Public Accounts in the years 2010-11 and 2014-15 the big four audit firms
such as PwC, Ernst & Young Delloitte and KPMG have played a crucial role in creating the
path of avoiding the payment of tax. The recent reports states that these firms provides tax
related advices that helps the multinational corporations to prepare an artificial presentation
on tax that reduce the burden of tax as per UK Government (Sikka 2015 ). According to the
annual report of ‘Her Majesty’s Revenue and Customs’ (HMRC) in the year ending 2014
states the main reason of tax gap are tax avoidance amounting to 35 billion UK Pound and
tax evasion amounting to 4.1 billion UK Pound (Sikka 2015 ).
The increasing trend of tax avoidance has changed the attitude of UK government and
evaluate the reasons of the increase in tax avoidance among the individuals and large
multinational corporations. The aim of UK government is to implement a fair system of
payment of tax within the country to avoid conflictions. As the revolution of technology has
changed the world of business and trade it is important for a government to change their
system, rules and provisions of paying tax accordingly. As per the knowledge of UK
government HMRC is the non-ministerial department that is responsible for collecting tax on
behalf of the government. The HMRC explains that the success of taxation system depends
on the prudence of tax payer such as paying adequate amount of tax, filling of return with in
time and complying the provisions of tax (Lord and Culling 2016). HMRC has taken several
measures to control the nature of tax avoidance among the individuals and business

MEASURES TO AVOID UNACCEPTABLE TAX AVOIDANCE IN UK
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organisations. That is why another department that named The Strategic Picture of Risk
(SRP), consists of higher level officials and intellect that assist HMRC to find out the reason
of tax avoidance, the details of taxpayers and emerging business uncertainties that lead to
noncompliance of tax rules in a strategic manner (Mousa, R 2016).
Figure: 1
Source: HMRC