The hallmark of good tax planning is that it will pass the Inland Revenue's scrutiny with flying colours, even where complicated family trust arrangements and considerable wealth are involved.
It is important to keep in mind the way the Inland Revenue distinguishes between the various attempts to minimise tax liability.
In particular you need to understand the terms "mitigation", "avoidance" and "evasion". Although these tend to be used indiscriminately, their meanings are very different.
If your tax saving has been encouraged by the government - for example you hold your investments in an Individual Savings Account (ISA) or a pension plan - that is mitigation. Make the most of the investment opportunities on which the government smiles.
Accountants might argue the point but broadly speaking avoidance, while not illegal, involves saving tax by using certain loopholes in the law. Some of these are tolerated but others exist only because the Inland Revenue hasn't got around to closing them or because to do so would create an impossibly complex set of rules. Proceed with caution.
If you deliberately omit something from your tax return or give a false description, that's evasion. You have not just been dishonest - you have acted criminally and could be fined or imprisoned. Don't even think about it!
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