Is this unacceptable tax planning?

[king_pellinor]

I've just been advised that I can get a tax relief in a particular situation.  Basically, A is paying £100 over to B; B already holds £100 on A's behalf, due to a previous transaction, but if A simply says to B "keep that cash", there's no tax relief.  If however B pays £100 to A and A then immediately pays it back to B, then we can claim tax relief.

That is: there's no commercial difference, but if we make two payments of cash which have no purpose other than to be able to claim tax relief, then we can get it.  That seems wrong to me.  Any thoughts?

To add a bit of information: B is a charity, A is a donor to the charity, and we're talking about Gift Aid (on a few hundred pounds).  Does that make it better?

Further information:  the person advising me to make payments purely to be able to access tax relief is HMRC.  What they're really saying is that we could qualify for Gift Aid but they're going to disqualify it unless we send the money round in a circle.  The substance of the matter is irrelevant: you only look at the legal form.  This is not how they tend to argue in tax avoidance cases, naturally ;-)

Comments

[wellinghall.livejournal.com]

Whether or not it is unacceptable tax planning probably depends on who is speaking to the media, and whose vote they are trying to get ...

[adaese.livejournal.com]

I've come across a similar situation, where I have been responsible for buying an item, value £x, for a registered charity. If we think to ourselves "I can't be bothered to ask the charity to repay me, I can afford to give this item to the charity instead", then the £x has come out of taxed income. If instead we make a donation to the charity of £x, and then gift aid it, then the charity is better off by the value of the tax previously paid on £x. And if we make a donation to the charity of £x using Wellinghall's Give As You Earn account, then we are better off, as the item was effectively paid for from his pre-tax income.

[bunn.livejournal.com]

Oh yes. I hadn't previously thought about the morality of it, to be honest. In my head it was just filed under:
1) All for Charidee
and also
2) Tax Magic.

[bunn.livejournal.com]

Tax magic being a subspeciality of Financial Wizardry, obv.