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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 evasion and acceptable tax planning in the UK?

Tax evasion is illegal and involves concealing or misrepresenting facts to pay less tax. Acceptable tax planning uses available reliefs, allowances and exemptions in the way Parliament intended, so it is lawful and appropriate advice for a client.

  1. AEvasion involves illegally concealing or misrepresenting information to reduce tax, whereas acceptable planning uses reliefs and exemptions in line with the intention of ParliamentCorrect
  2. BEvasion is any arrangement that reduces tax, whereas acceptable planning only defers tax without reducing it
  3. CEvasion involves using legislation in a way Parliament did not intend, whereas acceptable planning is any arrangement that is legal on its face
  4. DEvasion applies only to income tax, whereas acceptable planning applies to all other taxes

Explanation

Evasion is illegal: it involves concealing, omitting or misstating information to reduce tax. Acceptable planning uses reliefs as Parliament intended. Option C describes avoidance, not evasion, so it is wrong.

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