Party leaders muddled up on tax evasion and tax avoidance, say accountants Bishop Fleming

As the General Election draws nearer and party leaders are making promises to clamp down on tax evasion and tax avoidance a Westcountry accountancy firm has accused them of not knowing the difference between the two.

Matthew Lee, managing partner of Top 40 accountants, Bishop Fleming, said tax evasion and tax avoidance were easy to differentiate.

He said: “The heated build-up to the election has seen major parties competing to be ‘tough on tax dodgers’, but this has revealed a dangerous ignorance of the crucial difference between tax evasion and tax avoidance.

“In truth, it’s very simple. Tax evasion is illegal and should be stopped, but tax avoidance is the entirely legitimate application of tax rules to avoid paying more tax than is necessary.”

Mr Lee said he fears the blurring of that distinction by pre-election promises threatens entrepreneurs and the self-employed, who are crucial to the economy and its prospects for growth.

He added: “Britain is not like Greece. In this country, the overwhelming majority pay their taxes, but just want to avoid paying more tax than necessary – and that is entirely reasonable and legal.

“Politicians seems to have a misguided belief that there are £billions of taxes being hidden.

“It is certainly true that some well publicised global corporations are stretching the rules to minimise their tax, just as there are some loopholes, like the ‘Mayfair loophole’ used by hedge funds to elude their taxes.”

Mr Lee added: “Unfortunately, in their enthusiasm to be seen to crack down on these big tax evaders, the pre-election politicians are now confusing tax evasion with tax avoidance.

“That confusion is threatening to Britain’s vital army of small businesses and self-employed workers who use legal tax avoidance measures, such as paying themselves a dividend rather than boosting their salary.

“We all want to see tax evaders brought to account, but it would be disastrous to the economy if business owners were penalised for applying entirely legal processes to avoid paying excessive taxes.”