Budget2011: Tax advisers in focus for Budget

DISHONEST TAX ADVISERS are one focus of the Budget, with further consultation taking place over the next few months and draft legislation to be published in July.

Experts believe that HMRC saw the Christopher Lunn ruling as evidence of the need for stronger powers in dealing with tax professionals who stretch the rules on schemes and disclosure.

The case hurt the taxman, after a judicial review found the adviser deserved a chance to defend himself before his authority to work in the sector was removed.

Further consultation is planned and draft legislation will be published in July this year, which strongly suggests the tax office already has a well developed agenda in place.

Discussions have been underway for 18 months and experts believe the HMRC will argue present legislation is not robust enough.

But Richard Mannion, national tax director at Smith Williamson, claimed officials have not fully explored the powers already in place.

“I want to see HMRC using those powers already available to them before asking for more,” he said.

Paul Roberts, head of tax investigations at Grant Thornton, agrees. He suggests the consultation has uncovered shortcomings in the Revenue’s approach, saying options like reporting advisers to professional bodies were not fully explored.

Roberts speculates the draft legislation could pave the way for dealing with advisers who are “not outright dishonest”, but rather, have poor technical competence.

This could create a civil – rather than criminal – approach to dealing with weak tax professionals, with potential measures including penalties and public naming.

Another possible outcome of the consultation is tighter control over who can work in the sector.

With proposals to give tax advisers closer links to HMRC on behalf of their clients, the body is desperate for increased control over who they deal with.

This is according to Bill Dodwell, tax policy head at Deloitte, who sees a better system of tax adviser registration – and ways to deal with those that fail – as prerequisites for enhanced links.

Stephen Herring, senior tax partner at auditor BDO, said there was “no doubt” that some tax professionals adopt an aggressive approach to tax schemes without disclosing them.

He welcomed stronger powers for HMRC to deal with the small minority who fall outside the law, saying the vast proportion of reputable advisers would agree.