Has Starbucks Shot HMRC in the Foot?

There has been much press speculation about Starbucks not paying corporation tax in the UK and whether this is tantamount to tax avoidance and indeed whether it is tax evasion.

Starbucks suspected of Tax Evasion but more likely Tax AvoidanceAs a result of this bad press and accusation of being a tax avoider it has been reported that Starbucks will voluntarily pay £20m in UK corporation tax. The fact is that it cannot pay tax on anything but its proper profits as determined on accounting principles and in accordance with the law of the land. If it were engaged in tax avoidance then it is for the tax inspector to launch a tax investigation and if after due process the structures were found to be incorrect or not effective for UK tax purposes, then this would be classed as tax avoidance and tax would be paid as a result of the tax investigation.

The fact is that no matter how much the press tries to tar Starbucks with the tax evasion/ tax avoidance brush, what Starbucks has done, from what the writer has read, is perfectly legal in UK law and international principles of accountancy.

Thus HMRC have no facility to receive payment for money that is not due. If HMRC accepted the money which is not due under UK law, would this not make them as guilty of not following UK law (and therefore in effect reverse tax avoidance/ tax evasion) as the people they have stated publically they will be pursuing are, for not paying their tax.

If HMRC make a mistake and yet still chase people for the tax due from their mistake, is this not as bad as the tax avoidance the press are (falsely) accusing Starbucks of.

There is a massive gulf between structuring your tax affairs correctly and in accordance with the law (from what I can see this is what Starbucks have done) which is no more tax avoidance than paying into a pension or claiming personal allowances i.e. regular tax planning, and genuine tax evasion . There is also a massive difference between marketed tax planning relying on the fact that HMRC did not draft the legislation correctly in the first place and left so called “loop holes”( or as HMRC like to call in aggressive or unacceptable tax avoidance) and tax evasion. To quote from something heard in the past the difference between tax avoidance and tax evasion is the thickness of a prison wall (that is one is legal and the other is not).

The tax law of the land applies to everyone (HMRC, individuals and corporate bodies) and morals do not come into it (whether used immorally by a any party including HMRC). There has been too much merging of the boundaries between tax planning (all of which appears to be according to the government and HMRC under the heading of immoral tax avoidance) and tax evasion, which is completely different.

This has, in the writer’s opinion, resulted in some overzealous tax investigations where HMRC way overstep what they are allowed to do by law and leaves the ordinary business/ person at the behest of an HMRC inspectorate who, at times, acts more immorally than many of the people the press hound at the moment.

Gilbert Tax can help you

For most people, the simple thought of having to deal with an Tax Investigation or disclosing tax evasion is so terrifying that they avoid the issue altogether and often find themselves in even greater tax investigation difficulties with higher bills than they need to. There is no need to let problems large or small with the HMRC escalate to the point where your quality of life and health suffer.

At Gilbert Tax, we have a wealth of experience in finding closure for clients dealing with Inland Revenue tax investigation and significant experience in dealing with tax amnesty, defending enquiries into tax avoidance planning and tax evasion issues.

For a private discussion of your tax matters, please call Gilbert Tax on 0800 734 3333 or email us at: enquiries@gilberttax.co.uk

About Gilbert Tax

Joined the Inland Revenue in 1985 and after two years of training moved into tax investigation work. In 1996 he joined Ernst & Young’s tax investigation team and left them in 2005 to start Gilbert Tax. A member of the Chartered Institute of Taxation and chaired the Leeds branch between 2002 and 2004.
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