Tesco vs The Guardian: treading a fine line

Tax avoidance is not illegal

And yet Tesco’s libel writ against The Guardian for its allegations that the supermarket giant has avoided vast sums in corporation tax indicates that avoidance is now considered so unacceptable, companies cannot tolerate being accused of it.

HM Revenue & Customs has worked hard to get to this position and those who have campaigned against avoidance might consider the impending court room battle between The Guardian and Tesco a job well done.

Since the introduction of the tax avoidance disclosure regime, the line between avoidance and evasion has been blurred leaving tax experts and finance directors vague on where they might find solid ground.

Even Budgets now regularly include measures to close down specific schemes. In the last one, government relied upon the closure of schemes to add a £1bn to its coffers over the next three years. Attacking avoidance therefore pays.

And yet it remains the duty of company directors to manage their tax affairs in the most efficient way. It is in shareholders’ interests that the tax liabilities are controlled. Where this may leave us once again is seeking guidance at worst, definitions at best, on what is, or what is not, an illegitimate avoidance scheme.

Many tax experts will tell you that HMRC has deliberately avoided the offer of clarity ­ why would they? It doesn’t really suit the revenue-raising agenda. There must be legitimate tax management on the one hand, and artificiality on the other.

The experts need clarity over where these boundaries lie. While Tesco and The Guardian head toward a court showdown, it would be wise if HMRC saw how the battle highlights its own responsibilities.

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