Legal tax optimisation or evasion: where the line runs

Eighty years separate those two quotes — and the whole distance tax practice has travelled. Both positions are still alive. In the coming years the tax authority will look less for cash envelopes and more for the gap between the form of your business and its real substance. Check which side of the line your structure sits on — before the inspector does.

Yes. Article 67 of the Constitution obliges you to pay tax in the manner and amount set by law — not a word more. Article 19 adds that no one can be forced to do what the law does not require, and the state acts only within the powers granted to it. Inside the space of options the law allows, the taxpayer is free — and the tax authority has no power to narrow that freedom.

For the owner, tax is a cost line. Reducing it within the law is as normal as negotiating rent. The problem starts not with intent, but with method.

Look at the method, not the outcome (the budget got less). The law and case-law distinguish three situations, not two.

The danger isn't some "grey zone" on the horizon. It's the gap between what the documents say and what actually happens.

14.1.231 of the Tax Code requires an operation to have a reasonable economic reason — an effect that isn't reducible to tax savings. The law doesn't ban saving. It bans making the saving the sole content of the operation.

The Supreme Court in its ruling of 28 February 2023 in case no. 160/13387/19 said it directly: "For tax accounting purposes, the economic consequences created by business operations are taken into account in the first place, not the way those operations are documented." The analysis focuses on "the ultimate economic effect as an actual increase (change in value) of assets… regardless of defects… in the underlying documents." That cuts both ways: minor paperwork defects don't kill a real operation, but flawless paperwork won't rescue an empty one.

Run every structural decision through this test before you implement it — and don't set up entities or sole proprietors "just in case" if you can't answer the question.

The law doesn't ban having several entities and sole proprietors inside one group. The only question is whether each unit truly lives.

A common idea: seed the scheme with a nice business rationale from day one — memos, minutes, business plans — and the business-purpose doctrine can't touch you.

It doesn't work. A story is words. The court checks facts: who actually did the work, whose equipment, where did the money go in a circle, could this company exist without you. Real business generates its own consistent trail every day — bank transfers, counterparty reporting, correspondence, witness statements. A made-up construction has to be aligned by hand — and it tears at the first inconsistency you don't control.

Wanting to pay less tax has never yet hurt anyone whose form matched substance.

• Amazon, December 2023 — finally won its EU Court case against the European Commission over the Luxembourg royalty structure (C-457/21 P). The court held the structure fitted the transfer-pricing rules in force at the time — even though the tax motive was no secret.
• Gary Lineker, 2023 — beat off HMRC's £4.9m claim: the court looked at the relationships as they actually were, not at the wish to save.
• Apple — the mirror image: in September 2024 the EU Court finally ordered €13bn to be recovered, because the Irish structure's form and substance had drifted apart.

The losers aren't those who wanted to pay less. The losers are those whose paperwork stopped matching reality.

Short answer: no. And it's been tested experimentally. In 2017 the government of Norway — a country with arguably the highest tax culture in the world — launched an official mechanism for voluntary top-up payments by anyone who felt they paid too little. In the first six months Norwegians voluntarily paid the equivalent of about $1,300. Nationwide.

The Scandinavian constitutions say the same thing ours does: the Danish (§ 43) and Norwegian (§ 75) constitutions allow tax only on the basis of a statute passed by parliament. No legal order recognises a duty to "give more."

But Margaret Hodge's quote at the top isn't rhetoric — it's a working pressure mechanism. After the 2012–2013 scandals Starbucks voluntarily topped up the UK budget by £20m it did not legally owe, to stop a consumer boycott. A whole infrastructure grew up around it: public country-by-country reporting in the EU, GRI 207 on tax-strategy disclosure, the Fair Tax Mark. The law remained the ceiling and the floor of the duty — but for businesses working with Western partners, tenders and ESG reports, a second filter was added.

Sort every tax position into three buckets:

1. White zone. A direct option in the law: tax regime, single-tax rate, exemptions. Always take it — not using it is plain managerial carelessness.
2. Defensible position. There's a business purpose, the paperwork stacks up, and Supreme Court case-law is on your side. Take it deliberately, with a reserve for a possible dispute.
3. Artificial construction. Works only as long as no one is looking.

Make sure every link in your structure has an answer to the question "why do you exist". And that the answer doesn't reduce to the word "tax."

• [Diia City in 2026](/en/blog/diia-city-2026) — the special IT regime: taxation, resident status and reservation from mobilisation under the new rules.
• [Tax planning as a tool](/en/blog/tax-planning) — legal ways to reduce the tax burden without the risk of reassessments.
• [CFC reporting](/en/blog/cfc-reporting) — controlled foreign companies: filings, deadlines and common mistakes.
• [Sole proprietor vs LLC](/en/blog/sole-proprietor-vs-llc) — how to choose the right legal form for your business.