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ACCA Strategic Professional · Advanced Taxation (UK) · Appropriateness of planning measures to a taxpayer's circumstances and objectives

Which of the following best describes the difference between tax avoidance and tax evasion in the context of advising a UK client?

Tax evasion is the illegal concealment or misstatement of information to reduce tax, whereas acceptable tax planning uses reliefs and exemptions in the way Parliament intended. Evasion is unlawful regardless of whether HMRC has yet charged a penalty, so advisers must never assist with it.

  1. AAvoidance is the illegal non-disclosure of taxable income; evasion is arranging affairs within the law to reduce tax
  2. BEvasion is the illegal concealment or misstatement of information to reduce tax; acceptable planning uses reliefs as Parliament intendedCorrect
  3. CBoth are lawful, but evasion only applies to businesses and avoidance only to individuals
  4. DEvasion occurs only when the taxpayer is charged a penalty by HMRC, whereas avoidance never leads to any penalty

Explanation

Evasion is illegal: it involves deliberately concealing or misstating information to pay less tax. Acceptable planning uses reliefs and exemptions in the way Parliament intended. Option A reverses the two terms. Evasion is a criminal matter irrespective of whether a penalty has yet been charged.

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