Directors told avoiding tax is 'not a legal duty'
Avoiding tax is "not a legal duty" for directors, a leading London law firm has told the UK's biggest companies.
The legal opinion – commissioned by London-based pressure group Tax Justice Network – suggests that company directors cannot now reasonably claim it is their fiduciary duty to avoid tax.
In recent years, some top UK companies moved their tax HQ to Ireland in order to minimise their liabilities. Since then, the UK has lowered its corporate tax rate in an effort to ensure the jurisdiction remains competitive. There has also been a furore over the tax affairs of companies such as Google, Apple and Starbucks.
The opinion was delivered by law firm Farrer & Co. "It is not possible to construe a director's duty to promote the success of the company as constituting a positive duty to avoid tax," it said.
The Tax Justice Network was concerned that company executives were attempting to justify tax avoidance by claiming they had to deliver the best shareholder returns they could.
Farrer & Co said directors had a wide degree of discretion in how they paid taxes and, if they chose to do so responsibly, they would be protected by law.
"Legal risk in this area turns out to be a complete fiction, and company directors can stand firm and act according to their consciences rather than being swayed by what is effectively sales puff coming out of the tax avoidance industry," claimed Tax Justice Network director John Christensen.
"This opinion should make a real difference to company directors who are being told by their tax advisers that they have a duty to adopt anti-social tax measures," he added.