It is easy to get tripped up when it comes to tax planning, as the tax code is so complex it can be hard to understand where legitimate planning has gone wrong, says Kate Aitchison.
The tax director at RSM UK says even financial advisers could get caught out when they were not trying to break the rules.
She says the tax system should be made more user friendly and says there is a case for HMRC to be more open to having dialogue with taxpayers before they submit their returns.
Though Aitchison does sympathise with the government's attempt to clamp down on abuse, which has contributed to the complexity in the system.
“It is a case of making sure that you shut those loopholes so people can’t abuse the rules and do things that aren’t right. But sometimes it means that people who are in quite an innocent situation because they’re just trying to structure stuff in a better way get caught out and it can be quite painful," she says.
“I do wonder if there needs to be not necessarily a simplification, but a rewriting almost of the tax legislation to something more user friendly, particularly for people that are unrepresented. I think it’s easy to get tripped up and do something that’s not quite right.”
She adds: “Often it’s something that doesn’t quite feel right, that doesn’t pass the smell test…and I can’t quite put my finger on why, what part of the legislation we’re falling foul of here, but it doesn’t feel quite right.”
Aitchison says it would be useful if HMRC was more communicative when it comes to tax returns, allowing advisers to check difficult cases before submitting them.
“The challenge HMRC have got is that they are under-resourced," she says. "They’ve had some big ticket items to deal with over the last couple of years. You can see that in the service levels. Trying to get through to HMRC at all can be quite challenging.
“To make it more open and working with professional advisers would be useful.”
Aitchison joined RSM in March 2020. Her role is to help clients plan their tax affairs as well as check compliance. Her clientele is made up of a mix of individuals with trusts, partnerships and family businesses who seek help with issues such as trust structures, as well as transactional tax advice, for instance when selling their business or taking on an investor.
She often works in tandem with financial advisers and lawyers, saying for bigger clients with more complex affairs having a core team of a tax adviser, financial adviser and lawyer is key.
“Everyone does a bit of inheritance tax planning, but we all come at it from a different point of view,” she says.
