Wealth managers claim the government’s campaign to outlaw aggressive avoidance is frightening ordinary taxpayers from taking legal tax planning advice.
Prime Minister David Cameron and Chancellor George Osborne have criticised taxpayers for their involvement in immoral and unethical tax planning even though government policy and the law says they can arrange their financial affairs to save tax.
But one in six advisers taking part in a survey with financial firm Old Mutual reported the barrage of negative publicity from the government and HM Revenue and Customs (HMRC) was putting clients off legitimate tax planning.
They cite high profile cases involving sports stars and celebrities as one of the main reasons they are rejecting financial advice.
One in 10 financial advisers claimed a fifth of their clients were shunning tax planning, while a some placed the number as high as 40%.
Tax avoidance fears
Typical financial advice rejected as too risky included worries about claiming income tax and capital gains tax relief when investing in the Enterprise Investment Scheme (EIS) and concerns about making gifts and setting up trusts for inheritance tax planning.
The company’s financial planning expert Rachael Griffin explained tax planning within the law was reasonable and legal.
“The survey disclosed that ordinary taxpayers are worried about tax planning and could well feel pressured to pay more tax than they should because they are worried about being branded as a tax avoider,” she said.
Griffin also tried to allay fears of HMRC investigating taxpayers with trusts and potentially exempt transfers.
“These are allowed under the law, so HMRC has no concerns about taxpayers using them to manage their personal liabilities.
Scammers in court
“Most are designed to let families pass on their wealth to children, grandchildren, other family or loved ones without letting the tax man take almost half.”
Meanwhile in the latest tax scam to go before the courts, a gang claiming they had spent £250 million on developing film projects were found guilty of fraud.
Their victims were said to include football managers and players and a pop star.
Little Wing Films raised a total of £276 million from 275 wealthy investors on the promise they would be repaid £130,000 for every £100,000 invested.
Sentencing is at Birmingham Crown Court on June 24.