AHP1300 - Overview: what we mean by avoidance

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.

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 legitimate forms of tax planning. While such actions may reduce the total amount of tax paid, they are not tax avoidance, because they involve using tax reliefs in the way that Parliament intended when it passed the relevant legislation. If you are uncertain about whether something should be treated as avoidance, it should be notified up your directorate’s usual chain of referral and on to AAB Secretariat and brought into the Avoidance Handling Process. If it later transpires not to be avoidance it can be taken out of the process.