ANYONE promoting the sale of artificial tax avoidance schemes could be compelled to disclose their clients to the taxman, under a consultation announced today by exchequer secretary David Gauke.
The proposals include rules designed to penalise tax advisors who market “contrived” schemes that have “little or no chance” of working, as part of an initiative aimed at warning taxpayers of the risks of tax avoidance.
Promised in the Budget, the consultation to update tax avoidance schemes disclosure (DOTAS) legislation comes after public outcry over the tax affairs of celebrities and big business and its top brass.
It is unsurprising, then, that Gauke appeared determined in his speech to the Policy Exchange think tank, confident his initiative would receive popular support.
“There is little sympathy for those who don’t pay their share,” he said, but conceded “there will always be those who seek to shirk their responsibility”.
His confidence is not without foundation. Just last week, Olympic sponsors McDonald’s and Coca-Cola opted not to take up their entitlement to tax breaks during the Games after being handed a petition signed by some 150,000 people calling for them to pay up.
Given that swell of public feeling, it is hoped the latest proposals will “make it easier for taxpayers to identify such schemes when they are on the end of a hard sell by a dodgy promoter”.
In his speech today, Gauke boldly claimed: “Some consultations are an effective cure for insomnia, but this is one that will keep those involved with avoidance awake at night.”
That could well be the case, but there is concern among practitioners over the wide-ranging powers the proposals could usher in for HMRC. Chief among these is the power to demand client lists, which will be met with vociferous resistance.
The prospect of ‘naming and shaming’ those involved with tax avoidance is one with which few in accountancy are comfortable, especially given the rules on taxpayer confidentiality.
ICAEW chief executive Michael Izza – who has already courted controversy over his views on aggressive avoidance schemes peddled by advisors – has expressed reservations over that element of the legislation. With the institute fighting to gain legal professional privilege for their advisors’ clients in line with tax lawyers, such a move to force advisors to reveal clients would be disastrous.
While Gauke and the Treasury are likely to receive the public’s support for this latest move to reduce avoidance, the reservations of accountants at large must be addressed.
The more relaxed will point out that revealing points of view is the purpose of consultation periods. However, there is a feeling that the taxman’s determination to close the tax gap on the wave of public distaste at exotic avoidance schemes could see practitioners drowned out.
At this early stage, though, there is time enough to turn the tide.
CIot urges HMRC to consider a delay to the 1 September 2017 introduction of its new corporate offence of failure to prevent the criminal facilitation of tax evasion
HMRC intends to extend the date for withdrawal of transitional relief on investment growth from 30 November 2016 to 31 March 2017
The current business rates system is over-complex and reform is needed, but reforms should focus first of all on simplifying the appeals process, particularly for businesses which are subject to business rates exemption
The CIoT has called on the government to rethink its approach to ensuring online sellers pay the correct amount of VAT.