Involves the legitimate minimisation (or avoidance) of a taxation liability

Governments of all jurisdictions encourage us to save in a tax free ISA for example

Also tax-saving advantages to putting money into a pension scheme, donating to charity via the gift aid scheme or claiming capital allowances on things used for business purposes

Clients of OSPs with the assistance of their advisers can take advantage of all relevant legislation in order to structure their affairs and undertake their business in a way that minimises their tax liabilities to the extent permitted by the law

Not all methods of tax avoidance are condoned. If HMRC disagrees with how someone has reduced their tax bill it can demand that they pay the extra back plus the interest and any penalties

There are many shades of tax avoidance, but it is not illegal as long as you are open about it to your tax authority.

Involves the illegal evading of tax liabilities that are otherwise due and payable by individuals, corporations and trusts

Could simply involve an individual failing to declare to the relevant tax authority their income, gains or profits that would be liable to tax, resulting in a lower tax bill than would have otherwise been incurred.

Tax evasion may involve the failure to declare to the relevant tax authorities all of their income and / or capital gains received in respect of an interest bearing bank account or the making of a fraudulent tax return by under-declaring income to the authorities in their country of residence

A crime in almost all developed countries and the guilty party is liable to fines and/or imprisonment

In 2013, the Coalition Government in the UK announced a crackdown on economic crime. It created a new criminal offence for aiding tax evasion and removed the requirement for tax investigation authorities to prove 'intent to evade tax' to prosecute offenders

In recent years there has been greater scrutiny on the tax affairs of multinational companies. By operating in multiple jurisdictions and using holding companies to take advantage fo favourable tax treatment, they have been able to lower their reportable profits and thus the corporation tax burden they have suffered

Governments have begun to enact measures with the aim of reducing the tax avoidance arrangements of multinational individuals or companies. This has resulted in actions being taken by supranational and governmental organisations in order to try to limit the ability of those companies to avoid paying tax.

The base erosion and profit shifting (BEPS) imitative is one being undertaken by the OECD, in concert with the G20 nations. It aims to outline a package of measures designed to limit the mismatching of tax law between various jurisdictions and to put in place transfer pricing measures to limit the ability of companies to avoid tax

Some jurisdictions have begun to act early on this package of measures with the UK introducing the diverted profits tax (DPT) in response to tis. This was introduced in the Finance Act 2015 and applies where non-Uk resident companies attempt to avoid UK permanent establishments and where payments between companies are designed purely with the intention of avoiding tax. Where this is the case, punitive tax rates of 25% will be applied on profits HMRC considered to have been artificially diverted from the UK under these rules

As this is purely intended to target large, multinational institutions, the tax will not apply to those businesses with annual UK sales of less than £10million or where annual expenses related to the UK are below £1 million