Jersey: The Shifting Position Between Lawful Tax Avoidance & Unlawful Tax Evasion

Last Updated: 15 December 2014
Article by James Sheedy

1. The traditional attitude to tax avoidance is encapsulated in the judgment of Lord Tomlin in the English case of IRC v Duke of Westminster (1936):

"Every man is entitled if he can to arrange his affairs so that the tax attaching under the appropriate Acts is less than it otherwise would be. If he succeeds in ordering them so as to secure that result, then, however unappreciative, the Commissioners of Inland Revenue or his fellow taxpayers may be of his ingenuity, he cannot be compelled to pay an increased tax"

2. Whether this principle has survived in practice into the present era is a matter of speculation. In the last five years, there has been a growing tendency to conflate the two hitherto distinct concepts of avoidance and evasion together.


3. Lawful tax avoidance becomes unlawful tax evasion where there is deliberate and dishonest making of false statements to the Revenue (whether written or not and whether by omission or positive act). Tax evasion is often prosecuted under the English common law offence of cheating the public revenue. Cheating the revenue can include any form of fraudulent conduct which results in depriving the Revenue of the money to which it is entitled. To be fraudulent conduct, the Defendant's conduct must deliberately prejudice, or risk prejudicing, the Revenue's right to the tax in question, while the Defendant knows that he has no right to do so.


4. Typically, fraudulent intent on the part of a taxpayer or professional adviser is demonstrated where there is evidence of collusion between the taxpayer and others, or there is evidence that documents have been forged, with the intent of deceiving HMRC.

5. Many tax avoidance arrangements fail on technical grounds because they are artificial, lack a sufficient degree of commerciality and/or have been poorly implemented. Where an avoidance strategy fails in these circumstances, taxpayers and their professional advisers will not necessarily have acted fraudulently. More often than not, the conduct is characterised by a failure to implement the terms of the arrangement as advised rather than deliberate fraud.

6. Cases where there has been fraudulent conduct are distinguishable from cases where a tax avoidance arrangement has failed on technical grounds. Failed tax avoidance will only amount to criminal tax evasion where the taxpayer or professional adviser acted dishonestly, or fraudulently, in their dealings with the Revenue.


7. Dishonesty, as a touchstone for criminal tax evasion, has two elements:

Objective dishonesty: Firstly a jury must first of all decide whether according to the ordinary standards of reasonable and honest people what was done was dishonest.

Subjective dishonesty: The jury must consider whether the defendant himself must have realised that what he was doing was, by those standards, dishonest.

8. If the jury finds what was done was not objectively dishonest, that is the end of the matter but if the jury finds it was objectively dishonest it is then necessary to consider whether it was also subjectively dishonest.

9. In other words, it is dishonest for a defendant to act in a way which he knows ordinary people consider to be dishonest, even if he claims he genuinely believes that he is morally justified in acting as he did.

10. A jury's perception of what is honest or dishonest conduct has shifted dramatically in the last five years. That poses a considerable risk to a taxpayer who may have entered into a tax avoidance arrangement some years ago and there is a determination that the avoidance has failed due to artificiality or shoddy implementation such as not signing documents, back-dating documents, not making interest or capital repayments on loans or not devoting time to the loss-making activity in respect of which a tax deduction is claimed.

11. Will a jury give the taxpayer the benefit of the doubt that he did not appreciate what he was doing was dishonest by the standards of ordinary people?


12. Juries live in an atmosphere which is increasingly hostile even to the idea of tax avoidance. Erstwhile law-abiding individual and corporate tax avoiders are frequently publicly vilified in the media and by the authorities as morally repugnant and enemies of the public good. Senior government ministers include 'evasion and avoidance' in the same breath and the practice of tax avoidance/evasion at the top of the income scale with benefit fraud at the bottom. Further, while the UK's new GAAR is said to be directed at tackling 'abuse' rather than 'avoidance' the threshold of what is considered to be an abusive tax arrangement appears from the official guidance to be astonishingly low.


13. Jersey professionals and taxpayers should also note that section 13 Indictable Offences Act 1848 provides that an English arrest warrant may be executed against a taxpayer or professional advisor in Jersey who may be arrested and conveyed back to England to face trial or prison.


14. While the Jersey courts have stated that they have no sympathy for unlawful tax evasion, Commissioner Bailhache, when Bailiff, stressed that in cases of tax avoidance "Leviathan [a reference to the tax authorities] can look after itself", a position much closer to that espoused in Duke of Westminster.

15. However, Jersey has been keen to signal its cooperation with the UK government in tackling what it perceives to be a problem with offshore evasion and aggressive avoidance. Jersey clearly has an interest in being perceived as a reputable jurisdiction in which to conduct legitimate business. With that in mind, the Jersey government is currently consulting with the Island's finance industry on the viability of a so called 'Sniff test' to identify "aggressive tax avoidance schemes", association with which would be "detrimental to the good reputation of the Island". What the authorities propose to do when the 'Sniff test' is failed and how that action would stand up to scrutiny remains to be seen.


16. The attitude of the UK authorities and public perception has hardened against tax avoidance in the last five years. That has implications both for the authorities' willingness to bring charges and the benefit of the doubt juries are prepared to give to taxpayers and professionals. There is a heightened risk that tax avoidance schemes that fail for artificiality, poor implementation or lack of commerciality will be perceived as tax abuse or worse, evasion.

17. The attitude in Jersey to tax avoidance has been more generous than is currently the case in the UK. However if the reputation of the island as a financial centre is threatened by the perception that it is a safe harbour for unacceptable tax avoidance schemes we can expect measures to counter that perception. The message is watch this space.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Related Topics
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions