Tax hikes pressure advisers to market avoidance schemes
Tax experts have publically questioned whether professional advisers will capitalise on clients reeling from the introduction of the 50% band for income tax
Alistair Darling may have come down hard on avoidance in his Budget last
month but as his policy changes settle in the minds of those hit hardest, the
question arises, will the tax advisers become equally aggressive in their
attempts to help clients circumvent the most painful of the new measures?
Tax experts have already begun to publically question whether professional
advisers will capitalise on clients reeling from the introduction of the 50%
band for income tax.
It’s too early to determine whether the new rate for those earning £150,000
is sufficient to induce advisers, who ordinarily wouldn’t engage in aggressive
avoidance schemes, to do so. But there are those who believe it must surely
plant a seed in the minds of advisers.
Derek Allen, director of taxation at the
Institute
of Chartered Accountants Scotland, says: ‘You have to ask the question of
people going out of their way to find loophole. People will now say they’re
being taxed at 50% and it’s too much what can the adviser do about it? As the
rates go up there will be an increased push to mitigate it,’ he said.
Allen conceded that aggressive schemes present a tax saving to the client,
‘so the adviser is going to bring in more in fees.’
One underlying issue is that the UK tax system has ceased to be manageable as
a ‘self assessment process’ forcing taxpayers to seek advice and then lean on
advisers to push the boundaries of tax management.
Ultimately, as Allen points out, it is the taxpayer who sets the strategy in
the management of their tax affairs.
Allen said despite tax planning being such a high risk area, if an adviser
engages in a legal tax scheme, then he ‘doesn’t have a problem with it,’ and
believes 99.9% of tax professionals don’t become involved in the more
aggressive, artificial schemes.
Labour MPs recently made claims that such schemes are being promoted by many
of the top accounting firms, costing HM Revenue & Customs billions in
revenues.
HMRC’s business plan for 2009/10 declares the intention to close the tax gap
the sum of tax that is not collected but should be by £2.4bn.
Combine that with proposals for ‘naming and shaming’ recalcitrant tax
avoiders and observers believe the policy measures herald a new era of
aggression by the tax man. The question now is whether that will trigger an
equally aggressive response from advisers on behalf of clients.