'Unreasonable' penalty resistance from advisers
Tax advisers are resisting the introduction of new penalties for ‘unreasonable’ interpretations of tax law
The proposal, contained in the government’s consultation document on HM
Revenue & Customs powers, would see taxpayers who adopted unreasonable
interpretations facing penalties of a minimum of 30% of the tax due, and a
maximum of 100%.
Currently, such penalties apply only in cases of fraud or neglect.
The proposal is seen as a government attempt to crack down on flagrant
attempts to use the letter rather than the spirit of the law to obtain tax
deductions. It is an extension of the government’s view that avoidance should
cease to be a one-way bet.
Firm proposals could appear in the pre Budget report later this year, and
though the consultation suggests the move relates to tax evasion, a spokesman
for HMRC said it would apply to avoidance as well.
The deadline for comments closes on Friday next week. Paul Harrison, head of
investigations at KPMG, said the firm would be opposing the move in its
comments.
‘We cannot see that a penalty is appropriate in these cases,’ said Harrison.
‘The current categories cover everything that ought to be penalised.’
Advisers said the move showed HMRC’s increasing reliance on US methods, where
a test of whether a taxpayer feels their position is ‘more likely than not’ to
succeed applies.
John Whiting of PwC cautioned the government to outline the rights as well as
the responsibilities of taxpayers. ‘Like a lot of these things, this should be
about a balanced package,’ he said. ‘It shouldn’t just be about giving HMRC
powers.’
Richard Murphy, the anti-avoidance campaigner, said the rules would act as
more of a deterrent than anything else, and suggested they were targeted at
lawyers who offered opinions on tax schemes as ‘insurance’ for companies.
