Retrospectively make an act that was a legal one into an illegal one? Seriously? That would be an unbearable infringement of liberties. I don't like to run thin-edge-of-the-wedge-slippery-slope arguments but sometimes needs must.
For a start, who decides what is and isn't avoidance? We on this thread can't even agree on the morality of illegal evasion, so how could we agree an acceptable definition of avoidance? Suppose a UK business needs finance to expand and decides to borrow from a US lender (which means the UK borrower is entitled to claim a tax deduction in the UK but the interest income isn't taxed in the UK but rather in the US). Is that avoidance of UK tax? I don't think so. But i know people who do. The borrower could have borrowed from a UK lender maybe, in which case the income would have been all in the UK. Or perhaps some of the finance could have been structured as equity so that the return to the lender comes as non-tax deductible dividends. I think the borrower here made a perfectly reasonable commercial decision, but others don't.
What if a business is buying its stock from a sister company in Ireland. The tax legislation says that the UK company had to pay the same price for the goods it purchases as it would if the sister company was not part of the same group (the government doesn't want the UK to pay artificially high prices to the Irish sister company to strip profit out of the UK where it would be taxed at 24% and into Ireland where it would be taxed at 12.5%, while still keeping all the profits in the group). But the Irish sister company only sells its goods to related companies, so there aren't third party sales to benchmark the sales price against. So the group commissions a detailed economic study, which concludes that the Irish company would sell its goods to a third party at between £2 and £3 per unit. The UK company contracts with Ireland to buy at £2.90 At the upper end of the range but still within the range that an independent economist has said is reasonable. Is that avoidance? I don't think so. But I know plenty who do.
What about a self-employed husband who employs his wife in his business to answer phones and keep the books, for which he pays her a wage. She doesn't get paid much; just enough to cover her personal allowance and a little bit more. HMRC didn't like that; they thought that he should be taxed at 40% on the lot. So they took the husband and wife to court. And lost emphatically. They were basically laughed out of the room at every stage. The wife was working in the business, why shouldn't she get remunerated for it? Tough luck on HMRC that it meant she got paid at 0%, that's a natural outcome of the fact personal allowances exist instead of a flat rate of tax.
In a democracy we have the rule of law. Parliament makes law, HMRC administers it, the courts enforce it. That's the way it should work.
The courts can, and do, go out of their way to find arguments for why a tax avoidance scheme doesn't work. When that happens the tax avoider has to pay all the tax he tried to dodge, plus interest, plus penalties.
When the courts can't find a valid legal reason that a scheme doesn't work then parliament can, and does, change the relevant law. And sometimes retrospectively, so the scheme never worked. In which case avoiders (at least those who still have open tax returns) have to pay back taxes and interest.
But to make the retrospective changes such that the avoider, who had previously behaved legally, wad now criminal? No.
Suppose the government did the same thing to adultery. After all, many find adultery just as morally repugnant as tax avoidance. How would you feel about retrospective legislation that meant that anyone who'd ever had an affair in the past was now a criminal?
The courts can, and do,