Editorial: Osborne's synthetic shock

SO THE MEGA-RICH are pretty crafty when it comes to avoiding paying tax. Who’d have thought it?

For the chancellor at least, the revelation that Britain’s multi-millionaire set are exploiting loopholes so that they pay little or no tax at all came as more of a ‘shock’ than a surprise.

Yet for me it is George Osborne’s apparent shock that some are using aggressive tax mechanisms to slash the amount of tax they pay that is, well, shocking. Or more likely the argument is synthetic. It is difficult to credit the chancellor to have been living in a cavern beneath Number 11.

Osborne has pledged to crack down on aggressive schemes and the rhetoric chimes with action taken earlier in the year when Barclays copped it from HMRC just before the Budget for avoiding corporation tax on the profits arising from a buy-back of its own debt.

In this case, the rich have been writing off business losses against their income tax bill, offsetting the cost of business mortgages against buy-to-let properties and donating to not very charitable charities.

Osborne may find such activities repugnant, but it is worth remembering that they are perfectly legal. So what can the chancellor actually do?

The action taken against Barclays helped pave the way for the introduction of a GAAR and it may well be that the same principles can be applied in this instance.

There is a big difference between aggressive avoidance and legitimate planning and the UK accountancy profession are some of the best in the world at finding ways round the system for their clients.

I have no doubt that if Osborne manages to plug one hole accountants will be ingenious enough to find another one.

Richard Crump is deputy editor of both Accountancy Age and Financial Director