Viewpoint: HMRC's carousel initiative blurs boundaries

What is the significance of HM Revenue & Customs’ initiative to get
advisers to condemn carousel fraud?

In one sense, it may seem like a tedious announcement. Tax advisers, who by
definition help to limit client’s tax bills without transgressing the law, are
being asked assert that clients should not transgress the law. There’s nothing
new in that, and when the Big Four made their statement, it was hardly covered
by any of the media for that very reason.

On that basis, that advisers are clearly not involved, one might then ask the
question – why is HMRC doing this? It won’t achieve anything, and smacks of
desperation.

But there is something a little bit more interesting going on here. HMRC says
that  firms may at least be working with clients involved in the frauds. It
feels that banking and accounting professionals may, unwittingly or otherwise,
be providing a support network to fraudsters.

That opens up a slightly more worrying prospect. Should firms be concerned
that HMRC might find a legal avenue to clobber them if they have worked
unwittingly for the fraudsters? Have you done enough to ensure that you knew
what your clients do? If not, perhaps you should pick up the bill.

That seems a very real prospect, and until we know more about what HMRC is
getting at on this issue, and what evidence it has, we will remain in the dark.

It would not be a new development in some respects, as the Bond House case
has shown.

On another level still, the line between evasion and avoidance seems to have
decisively broken down.

David Varney wrote to firms and institutes saying: ‘A small number of tax
advisers mistakenly see carousel fraud as some form of clever tax planning
rather than a dishonest and criminal exploitation of the tax system.’

Advisers, if they have made those points, are doing the profession no
favours. And the Revenue, in targeting honest advisers to catch dishonest
people, will only blur that line even further.