rosequartz Some schemes are so complex that it is difficult, without an in-depth investigation, to establish whether they are tax avoidance or tax evasion schemes. A well known example was the K2 scheme, investigated by The Times and used by several high profile people.
The Times reported that at a seminar in Birmingham, Roy Lyness of Peak Performance told an undercover reporter that his scheme would net company directors 80% of their earnings. "A contractor will net approximately 82% of their earning after all taxes. And a director will net approximately 80% after all taxes and costs."
The scheme involved UK earners "quitting" their jobs and signing new employment contracts with offshore shell companies. Those companies then "rehired" their new employee back out to the UK but take their earnings. The offshore company then paid their employees a much lower salary but also "loaned" them thousands a month. However these loans were written down as tax liabilities, reducing the overall tax bill.
I'm not sure what the outcome of the HMRC investigation was. From what I've read, it appears it was ruled that the scheme was illegitimate because it was artificially constructed solely for the purpose of reducing the tax burden. I believe the scheme was closed but was not deemed to be fraudulent/illegal. I would imagine that the average person would probably be confused by this outcome - I certainly am. It seems that those who devise these schemes almost have carte blanche to "give it a go", knowing that only the most blatantly fraudulent schemes are likely to be adjudged illegal. On top of that, to investigate these schemes is, I believe, an expensive and time-consuming matter which will not be embarked upon unless the potential tax losses are very high. Because of this, it is likely that many illegitimate schemes continue undisturbed, with the loss of billions of pounds to the government.
Whether such schemes are deemed to be illegal or not, to my mind they are just plain wrong and those that employ them deserve nothing but contempt.