The institutes are squaring up to HM Customs & Revenue over carousel fraud, claiming the taxman has slurred advisers’ integrity and been ‘crass and stupid’ in its approach.

The ICAEW, CIOT and ACCA are refusing to sign statements from HMRC condemning carousel fraud. The government’s approach has enraged the bodies, although they are all united in their condemnation of the fraud.

The two sides are set for a showdown today at a meeting of the Joint VAT Consultative Committee, the major discussion forum for indirect tax issues.

HMRC chairman Sir David Varney asked institutes and mid-tier firms in December to make statements condemning the frauds, writing in a letter: ‘A small number of tax advisers mistakenly see [the frauds] as some form of clever tax planning rather than a dishonest and criminal exploitation of the tax system.’

Several mid-tier firms, as well as the Big Four, have answered Varney’s call, but ACCA, the CIOT and the ICAEW are refusing to sign a letter condemning the frauds. Of those asked by Accountancy Age only ICAS has taken any steps to bring the view of HMRC to its members, though it labeled the department’s declaration a ‘poorly written letter’.

Derek Allen, director of taxation at ICAS, said the suggestion was ‘crass and stupid’, while Frank Haskew, head of the ICAEW’s tax faculty, said: ‘Our view is that if it’s fraud, it’s fraud. Our members should know the difference.’

Stephen Coleclough, chairman of the CIOT’s technical committee, told Accountancy Age that the claim was wide of the mark. ‘If the government is aware of any advisers who do think that, why haven’t they told us? Even if a conviction is not obtainable it would still be a disciplinary issue,’ he said.

Coleclough said advisers were unlikely to be involved. ‘The last thing one of these criminal gangs is going to do is come and ask for tax advice.’

The onus was on HMRC to tackle the problem, which costs the UK between £1.1bn and £1.9bn a year.

‘There’s a huge amount of money going down the plughole, and it’s time for them to do a better job,’ said Coleclough. ‘Ten percent of the money lost here is more than all the anti-avoidance initiatives of the past year.’

HMRC declined to respond to the institutes’ broad criticisms, adding only that it would report advisers under rules laid down ‘as and when examples come to light’.