UK tax avoidance - the tax divide

In the world of UK tax, not all strategies or consequences are created equal.

Across a series of videos in the process of being produced for our YouTube channel investigative series, where we explore how tax avoidance operates in Britain, why it's so hard to control, and what it reveals about fairness in our tax system. This blog brings those threads together, highlighting what really matters, without giving too much away.

Tax avoidance: Legal, but it can be harmful                                  

Tax evasion is a criminal offence in the UK. It involves illegally evading paying taxes owed to HM Revenue & Customs (HMRC) by deliberately misrepresenting or concealing information. 

Tax avoidance is not tax evasion. Tax avoidance should stay within the boundaries of the law. However, there are varying shades, grades, levels and qualities of tax avoidance. These range from compliant accepted approaches to other, contrived, high-risk egregious schemes. 

At its core tax avoidance works by exploiting ambiguity and complexity in the rules. And it's big business. The latest information, at the time of drafting this blog, is for the 2023 to 2024 tax year, where HMRC "estimates the tax gap to be 5.3% of total theoretical tax liabilities, or £46.8 billion in absolute terms." (See HMRC website here: https://lnkd.in/dZA2xD9T) Some of this stems from avoidance, with public and parliamentary reports confirming this involves mass-marketed tax avoidance schemes.

Consequently, these schemes are not new or hidden. As explained above, they are marketed products, promoted by advisers claiming legitimacy. Often, they promise “efficiency” and “compliance.” However, they use high-risk strategies that break both the letter and spirit of the law. These are likely to attract HMRC scrutiny, legal challenge, and actions to shut the schemes down — often followed by eye-watering tax bills, including penalties and interest. When this happens, it's not the promoter who pays. Instead, it's the client who pays and suffers the reputational damage.

The adviser illusion

One recurring theme across all episodes is the false sense of security created by advisers. The UK has no legal requirement for tax advisers to be qualified or regulated. As a result, individuals can be led into complex arrangements by those with prestige but little accountability.

Whether it's boutique consultancies or established firms, the same pattern repeats: clever structures, promised savings, and a veil of certainty. Once challenged, however, clients are often left alone to face the consequences.

This disconnect between perception and substance fuels the system. And the consequences go beyond tax bills. They touch public trust, institutional integrity, and perceptions of fairness in the tax system.

The structural divide: SMEs vs. Multinationals

Small and medium-sized enterprises (SMEs) engage in basic tax planning: capital allowances, pensions, or dividends. These strategies are straightforward, fully disclosed, and usually designed with the UK tax system to support investment and growth.

Multinational corporations, on the other hand, can structure profits globally. Moving income to low-tax jurisdictions through royalties, transfer pricing, or IP arrangements. The complexity and scale allow for sophisticated planning that often stays ahead of regulators.

And here's the kicker: enforcement isn’t equal. SMEs face tighter scrutiny and less room to negotiate. Global giants, by contrast, often “discuss” settlements in private sometimes at rates that don’t reflect their UK operations.

A perception for the public that enforcement fails

Why does it take so long to shut abusive schemes down?

Procedural hurdles, legal ambiguity, cross-border complexity, and deliberate obstruction all contribute. Even when laws like DOTAS (Disclosure of Tax Avoidance Schemes) or POTAS (Promoters of Tax Avoidance Schemes) exist, they don’t allow HMRC to immediately shut schemes down. Instead, schemes may continue for years. Legal challenges can last up to a decade. 

The power of the large conglomerate corporations

Then there is the power dynamics between large corporates and tax authorities worldwide. Large multinational corporations wield significant economic and political influence due to their sheer size, scale of employment, and contribution to national economies. This gives them a form of negotiating leverage in their dealings with tax authorities around the globe— which frankly provides them with opportunities often allowing them to shape, defer, or minimise enforcement outcomes. 

Political sensitivities

There are also the political sensitivities that can override enforcement. In many cases, enforcement decisions involving multinationals are not based solely on legal principle or compliance but are tempered by political considerations. Governments/countries may fear job losses, reputational consequences, or capital flight, making it more prudent and so more likely for them to seek informal “compliance encouragement” rather than full-scale enforcement.

Revolving doors

The blurred lines between state and corporate interests are further complicated by MPs taking roles within multinational firms/acting as paid consultants/lobbyists and vice versa. This can raise further public concern over fairness and regulatory impartiality.

The resources gap: HMRC finite resources versus the infinite resources of global corporates 

There have been high profile cases where HMRC has decided not to pursue further litigation due to the cost, complexity, or limited likelihood of success, particularly in cases involving large multinationals. This admission reflects the resourcing imbalance between HMRC and some global giants. The latter can afford drawn-out litigation, with access to expert tax advisers, lawyers, to deploy aggressive litigation strategies. Particularly in complex cross-border corporate tax disputes, while HMRC cannot.

In some cases, large corporations may be able to treat legal and professional fees related to defending their tax position as deductible expenses, depending on the nature and purpose of the expenditure. Individuals typically cannot deduct legal costs except in specific circumstances. Therefore, large companies may be able to account for legal costs as deductible business expenses, and prolonged litigation might not materially affect their financial viability, unlike an individual taxpayer or small business. 

This adds to the public’s perception that wealthy large powerful cooperates have the money and resources to prolonging matters and out resource tax administrations around the world.

Disproportionate treatment of SMEs

In contrast, small and medium-sized enterprises (SMEs) and individuals all lack political influence, lobbying access, and negotiation bandwidth of large multinationals. As a result, they often bear a more direct approach in HMRC enforcement in their cases. This disparity contributes to a growing perception that the tax system is structurally biased in favour of the wealthy, powerful or privileged.

However, the following well-publicised tale is a case where political sensitivities were challenged head on. It concerns a £130 million UK deal with Google versus France’s €1.6 billion enforcement, back in 2025. The French tax authority to challenge Google head contrasted with the UK approach of quiet negations. The perception of unfairness in both the favourable polite treatment of Google and the substantially lower value outcome in the UK remains today. Meanwhile Google presence in France remains undiminished today. 

Public mood: The morality gap

Legality is no longer the only test. In an age of austerity and squeezed services, public sentiment is shifting from “Is it legal?” to “Is it fair?”

I recall an exchange back in the early 2000s, during a presentation delivered by the then Anti-Avoidance Group (AAG) tackling tax avoidance, in the early days of my introduction to HMRC’s efforts. The AAG was the fore runner the current HMRC Counter Avoidance Directorate today. Back in the 1990s and early 2000s, it felt that tax avoidance was often regarded as clever financial planning. A strategic game played between advisers and HMRC. The lines were blurred, and few had the appetite to sharpen them.

The presenter (a senior leader in the AAG) began their presentation with words I still remember clearly today:

“Tax avoidance is usually undertaken by entrepreneurs and large cooperate and we need to understand that they are used to taking risks and speculating, they see this activity as a way of seeking to maximise their tax efficiency.”

It was an interesting opening line to a presentation on the team’s work tackling tax avoidance; one I was not expecting, but the interjection that followed that opening sentence was even more of a surprise. A colleague — normally reserved and thoughtful, not known for outbursts — interrupted the presentation suddenly with a quiet fury saying firmly out loudly: 

“No, they’re not. They’re just greedy. Greedy, conniving individuals.”

The room went silent, save for the sharp intakes or breaths. The words landed with force. 

This outburst illustrated the core of a contradiction being widely sensed by the public outside the room at large, fuelled by growing media attention: that while these aggressive tax schemes openly test the limits of legality, HMRC’s response appeared curiously restrained and courteous. This disparity from an industry long hidden behind boardroom doors, was beginning to make regular headlines. Reinforcing the public's perception that when it comes to the large, wealthy, and well-advised, enforcement resembled a gentleman’s handshake more than a hammer.

That moment marked the beginning of a shift in the approach and activity I witnessed across HMRC. The end of what appeared and felt like passive tolerance. It preceded the emergence of a more combative stance. One shaped not just by enforcement objectives, but by growing moral discomfort. By then, public opinion had already begun to harden against the industrial scale of aggressive brash cooperate tax avoidance.

The rise in public awareness and outrage was fuelling calls for change, more regulation, adviser accountability, and perhaps even new taxes on wealth or corporate profits. If tax feels optional for the rich and compulsory for everyone else, then a morality gap will continue to grow.

Where next?

Despite HMRC’s progress—naming schemes, prosecuting some promoters, increasing penalties—avoidance persists. Complexity protects those with access. Enforcement still lags. And high-profile schemes often fade from headlines before they are resolved.

There is no single fix. But stronger regulation of advisers, faster enforcement, and clearer public information are key steps forward.

Ultimately, this is not just about tax, it’s about fairness, trust, and what kind of society we want to build. These are questions for society and not just about the tax system. The UK tax system is not fully capable to deal with this problem. To be fair to HMRC, the problem is not one of HMRC’s doing, although there are those who say it could do more. 

The issue runs deeper than tax avoidance alone. The 2016 case involving Google, and the contrasting tax settlements obtained in France and the UK, illustrates this clearly. It showed that the decision by large multinationals like Google to establish operations in a country is not determined solely by the rate of tax. In that instance, Google appeared willing to pay more tax in France in order to meet its broader commercial objectives. While it is reasonable to assume that all multinational companies have a threshold beyond which tax becomes a deterrent, the 2016 Google case suggests that maybe the UK corporate tax rates for multinationals may be nowhere near that limit. If this has any traction, then it challenges the idea that competitive tax rates are the primary driver of multinational investment decisions.

The strength of a tax authority lies not only in its technical tools, and it is only as strong as the political will and cultural appetite behind it. A tax authority’s effectiveness in enforcing corporate compliance—particularly among large international groups—is ultimately shaped by the country’s political will, institutional resolve, and cultural attitude towards corporate taxation. Without all these factors being in place tax avoidance will continue, and let’s not forgot the UK has the highest number of overseas dependencies that provide tax avoidance havens on an industrial scale. 

Want to learn and understand more?

Watch full series on UK tax avoidance on our YouTube channel coming up soon. With real-world comparisons, enforcement challenges, and systemic questions few are willing to ask.