How much less is rarely clear. In practice there seem to be two targets:
- Any feasible and legal reduction in taxes as compared with current expectations; and
- As much of a 'wipe-out' of the tax otherwise due as can feasibly be achieved legally.
Simply stated it is legal to legitimately minimise your tax liabilities through:
- Claiming all available allowances and reliefs;
- Claiming tax relief for expenditure incurred “wholly and exclusively” for business purposes; and
- Planning your affairs to keep your tax liabilities as low as possible within the law.
On the other hand it is ILLEGAL to deliberately/dishonestly evade tax. This includes:
- Claiming tax relief for non-business expenses;
- Telling untruths on your tax return or in the way you describe transactions;
- Failing to include all of your taxable income in your accounts;
- Withdrawing money for personal use from an incorporated business (company) and not making any attempt to make sure it is treated correctly for tax purposes;
- Failing to declare all of your taxable income and gains on your tax returns;
- Failing to ask for or to complete tax returns to report your taxable income and gains.
The consequences of illegal activity typically include: Revenue investigations, back taxes, interest on late paid tax and penalties (up to 100% of tax), time, hassle, professional fees, and if you’re very unlucky, ill-advised or stupid – prosecution and prison.It is also worth stressing that the level of penalties charged these days depends very much on whether or not you were deliberately avoiding your tax obligations.