SONIA (GBP) funds/ETFs

eskbanker

GeoffTF said:

eskbanker said:

GeoffTF said:
Tax Avoidance, which is illegal

Tax evasion is illegal, but avoidance typically isn't:

Tax avoidance is to be distinguished from tax evasion, where someone acts against the law. By contrast tax avoidance is compliant with the law, though aggressive or abusive avoidance, as opposed to simple tax planning, will seek to comply with the letter of the law, but to subvert its purpose.

https://commonslibrary.parliament.uk/research-briefings/cbp-7948/

That is no longer true. Here is the HMRC introduction:

https://www.gov.uk/guidance/tax-avoidance-an-introduction

"What tax avoidance is

Tax avoidance involves bending the rules of the tax system to try 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 this advantage. It involves operating within the letter, but not the spirit, of the law.

Most tax avoidance schemes simply do not work, and those who use them may end up having to pay much more than the tax they tried to avoid, including penalties."

It is best to take professional advice before undertaking tax saving wheezes that were not intended by Parliament.

So it is true then!  Nothing there states that tax avoidance is illegal, despite the tone (unsurprisingly!) discouraging it, and it even goes as far as to say that it involves operating within the letter of the law....

GeoffTF

eskbanker said:

GeoffTF said:

eskbanker said:

GeoffTF said:
Tax Avoidance, which is illegal

Tax evasion is illegal, but avoidance typically isn't:

Tax avoidance is to be distinguished from tax evasion, where someone acts against the law. By contrast tax avoidance is compliant with the law, though aggressive or abusive avoidance, as opposed to simple tax planning, will seek to comply with the letter of the law, but to subvert its purpose.

https://commonslibrary.parliament.uk/research-briefings/cbp-7948/

That is no longer true. Here is the HMRC introduction:

https://www.gov.uk/guidance/tax-avoidance-an-introduction

"What tax avoidance is

Tax avoidance involves bending the rules of the tax system to try 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 this advantage. It involves operating within the letter, but not the spirit, of the law.

Most tax avoidance schemes simply do not work, and those who use them may end up having to pay much more than the tax they tried to avoid, including penalties."

It is best to take professional advice before undertaking tax saving wheezes that were not intended by Parliament.

So it is true then!  Nothing there states that tax avoidance is illegal, despite the tone (unsurprisingly!) discouraging it, and it even goes as far as to say that it involves operating within the letter of the law....

You now have to act within the letter of the law of the anti-tax avoidance legislation, as well as any other letter of the law. You risk heavy penalties if you do not.

https://www.pinsentmasons.com/out-law/guides/the-uks-general-anti-abuse-rule

eskbanker

GeoffTF said:

eskbanker said:

GeoffTF said:

eskbanker said:

GeoffTF said:
Tax Avoidance, which is illegal

Tax evasion is illegal, but avoidance typically isn't:

Tax avoidance is to be distinguished from tax evasion, where someone acts against the law. By contrast tax avoidance is compliant with the law, though aggressive or abusive avoidance, as opposed to simple tax planning, will seek to comply with the letter of the law, but to subvert its purpose.

https://commonslibrary.parliament.uk/research-briefings/cbp-7948/

That is no longer true. Here is the HMRC introduction:

https://www.gov.uk/guidance/tax-avoidance-an-introduction

"What tax avoidance is

Tax avoidance involves bending the rules of the tax system to try 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 this advantage. It involves operating within the letter, but not the spirit, of the law.

Most tax avoidance schemes simply do not work, and those who use them may end up having to pay much more than the tax they tried to avoid, including penalties."

It is best to take professional advice before undertaking tax saving wheezes that were not intended by Parliament.

So it is true then!  Nothing there states that tax avoidance is illegal, despite the tone (unsurprisingly!) discouraging it, and it even goes as far as to say that it involves operating within the letter of the law....

You now have to act within the letter of the law of the anti-tax avoidance legislation, as well as any other letter of the law. You risk heavy penalties if you do not.

https://www.pinsentmasons.com/out-law/guides/the-uks-general-anti-abuse-rule

The GAAR provisions aren't some recent introduction and were enacted via the Finance Act 2013, eight years before the piece I quoted earlier, and are specifically aimed at abusive schemes, such as those joined by the likes of Jimmy Carr, rather than the type of tax optimisation envisaged earlier in this thread, hence my use of 'typically', i.e. tax avoidance may be illegal in extreme circumstances but is generally used to describe legal actions.

Albermarle

GeoffTF said:

eskbanker said:

GeoffTF said:
Tax Avoidance, which is illegal

Tax evasion is illegal, but avoidance typically isn't:

Tax avoidance is to be distinguished from tax evasion, where someone acts against the law. By contrast tax avoidance is compliant with the law, though aggressive or abusive avoidance, as opposed to simple tax planning, will seek to comply with the letter of the law, but to subvert its purpose.

https://commonslibrary.parliament.uk/research-briefings/cbp-7948/

That is no longer true. Here is the HMRC introduction:

https://www.gov.uk/guidance/tax-avoidance-an-introduction

"What tax avoidance is

Tax avoidance involves bending the rules of the tax system to try 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 this advantage. It involves operating within the letter, but not the spirit, of the law.

Most tax avoidance schemes simply do not work, and those who use them may end up having to pay much more than the tax they tried to avoid, including penalties."

It is best to take professional advice before undertaking tax saving wheezes that were not intended by Parliament.

In this case what should we call the many things recommended on these forums?
Such as increasing pension contributions to get more tax relief/avoid child benefit penalties/ pay less student loan.
Keeping money in  a pension to avoid IHT
Keeping money in an ISA to avoid tax
Investing in VC schemes 
etc.
It is all tax avoidance but not bending the rules as such, which is normally referred to as aggressive tax avoidance, but HMRC seem not to be using that expression in the above.

GeoffTF

I am not offering an opinion as to whether the proposed scheme is legal or not, but I decided that I would not do it myself.

eskbanker

GeoffTF said:

I am not offering an opinion as to whether the proposed scheme is legal or not, but I decided that I would not do it myself.

Likewise, I'm also not offering an opinion as to whether the proposed action (I wouldn't go so far as to call it a scheme) is legal or not, and was simply challenging the blanket unqualified assertion that tax avoidance is illegal!

Revisiting the start of this exchange....

andyhe said:

Outside of an ISA... if a personal savings allowance has been exhausted, are there any gotchas in selling a MMF before going ex-div then re-buying afterwards to avoid the dividend (which is classed as interest), and make use of a capital gains allowance?

The gotcha to be considered would be the thirty day rule if you're trying to optimise CGT liability, i.e. if you repurchased the asset within 30 days of selling, it wouldn't make use of a capital gains allowance....

GeoffTF

The RL fund pays dividends twice a year. My conclusion was that I was not clear that Parliament intended this course of action. (Accrued interest was introduced for gilts to prevent it.) I take a lot of care to ensure that my tax returns are within the letter and spirit of the law, but everyone can make mistakes, and I would rather not attract additional scrutiny.

andyhe

Thank you both, certainly food for thought. I realised after posting that there would be a 30 day buy back restriction. I'd only be doing this as part of some consolidation and will choose my next steps carefully.

spider42

eskbanker said:
The gotcha to be considered would be the thirty day rule if you're trying to optimise CGT liability, i.e. if you repurchased the asset within 30 days of selling, it wouldn't make use of a capital gains allowance....

Why not? You would be selling at the price before it goes ex-div (higher), and repurchasing shortly afterwards at the ex-div price (lower). The sale would be matched against the future purchase at a lower price. You would therefore make a capital gain and use the annual exemption.

eskbanker

spider42 said:

eskbanker said:
The gotcha to be considered would be the thirty day rule if you're trying to optimise CGT liability, i.e. if you repurchased the asset within 30 days of selling, it wouldn't make use of a capital gains allowance....

Why not? You would be selling at the price before it goes ex-div (higher), and repurchasing shortly afterwards at the ex-div price (lower). The sale would be matched against the future purchase at a lower price. You would therefore make a capital gain and use the annual exemption.

But by virtue of the matching within 30 days, the sale doesn't count as a disposal for CGT purposes and therefore doesn't use the annual exemption.