ExpertEasy2 marksMultiple Choice
ACCA · Question 12 · The UK tax system and its administration
Section A
Which of the following scenarios is an example of tax evasion rather than tax avoidance?
Section A
Which of the following scenarios is an example of tax evasion rather than tax avoidance?
Answer options:
A.
Maximizing contributions to a registered pension scheme to reduce taxable income.
B.
A cross-border multinational deliberately suppressing sales invoices to reduce its UK Corporation Tax liability.
C.
Transferring income-producing assets to a spouse who is a basic rate taxpayer.
D.
Delaying the sale of an asset until the new tax year to utilize the next year's Annual Exempt Amount.
How to approach this question
Distinguish between legal use of tax rules (avoidance/planning) and illegal concealment or misrepresentation (evasion).
Full Answer
B.A cross-border multinational deliberately suppressing sales invoices to reduce its UK Corporation Tax liability.✓ Correct
Tax evasion is the illegal non-payment or underpayment of tax, usually involving fraud, concealment, or misrepresentation (e.g., suppressing sales invoices). Tax avoidance (or tax planning) involves using legal methods and statutory reliefs to minimize tax liability, such as utilizing pension contributions, spouse exemptions, or timing disposals.
Common mistakes
Confusing aggressive tax avoidance with tax evasion. Evasion is always illegal.
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