PLANS to fine accountants, tax planners and advisers who design, market or facilitate the use of tax avoidance arrangements go ‘too far’ and risk capturing traditionally accepted tax planning, advisers have warned.
Under measures set out in an HMRC consultation, accountants and advisers who promote tax avoidance schemes could be fined up to 100% of the value of the unpaid tax as a result of using the scheme.
Currently tax avoiders face significant financial costs when HMRC defeats them in court. However, those who advised on, or facilitated, the avoidance bear little risk.
Jane Ellison, financial secretary to the Treasury, said: “Those who seek an unfair advantage, or who provide the services that enable it, and who then frustrate HMRC’s efforts to identify, investigate and resolve these cases, should bear real risks and costs for their choices. This consultation sets out plans and proposals to bear down on this shrinking but persistent minority.”
The consultation clarifies the rules around whether proven tax avoiders have taken reasonable care to ensure their tax returns do not contain inaccuracies, making it simpler to enforce penalties when avoidance schemes are defeated.
“Given how uncertain tax law is, this is not a fair basis on which to punish tax advisers or other associated professionals. There is no requirement for tax advisers to have negligently or knowingly failed to point out the tax risks to their clients. Instead, their livelihood is put at risk for doing their job,” said Tom Wesel, partner at boutique tax consultancy firm Milestone International.
“As it stands, the current proposals are one-sided, ludicrously draconian, and need to be revised.”
The consultation also makes clear that an ‘enabler’ of tax avoidance includes anyone in the supply chain who benefits from a client using a tax avoidance arrangement., and without whom could not have implemented the arrangement.
According to Fernie, partner and head of tax investigations at Pinsent Masons, aspects of these proposals go too far and could end up capturing traditionally accepted tax planning.
“The document lays out a definition of tax avoidance which is far too broad at present. The wording of the proposals suggests that measures will cover not only all schemes counter-acted by the General Anti-Abuse Rule (GAAR) or notifiable under DOTAS but also those which have simply been the subject of a targeted avoidance-related rule or ‘unallowable purpose test’ contained within a specific piece of legislation. This is incredibly wide-ranging and the criteria need to be tightened,” she said.
This is the latest of a number of government measures designed to tackle illicit finance and tax dodging. These include a new criminal offence for corporations that fail to prevent the facilitation of tax evasion, and new sanctions against those who engage in multiple avoidance schemes which are defeated by HMRC.
The deadline for comments is 12 October.