Firms’ shock at new rule

An unpublicised convention on company prosecutions threatens to ruin the government’s spend-to-save plan, and cost the taxpayer billions of pounds.

The convention was written by the Attorney General John Morris, QC, in February, but had been secreted away in the Library of the House of Commons until it was unearthed this week by Accountancy Age.

Essentially it is an agreement between authorities such as the Inland Revenue, Customs & Excise and the Crown Prosecution Service to co-ordinate their prosecutions. Other signatories include the Department of Trade and Industry and the Serious Fraud Office.

Tax experts were shocked to learn of its existence and said it would make it almost impossible to approach the Revenue offering tax settlements without putting clients at risk of criminal prosecution. Settlements have always been a key pillar of the Revenue’s tax-collection strategy, including the high-profile spend-to-save campaign, bringing in billions of pounds annually.

John Gwyer, partner at Levy Gee, said: ‘They’ve entered into this convention, but as far as we know, no-one in the accountancy profession knew about it. It seems they’ve agreed formally it is all right to exchange information.’

Last week, four of the Big Six announced they had ceased negotiations with the Revenue after a Court of Appeal ruling in the Regina v W case, which looked as if it could leave clients open to prosecution when they owned up to tax errors.

Two members of counsel from the case this week set about convincing accountants the ruling changed nothing, but with the emergence of this convention – which post-dates the Court of Appeal case – it looks unlikely accountants will be launching into fresh negotiations with the Revenue.

Even Martyn Bridges, an investigations partner at Deloitte & Touche, who last week said his firm would continue to negotiate after Regina v W, said he was worried. ‘This seems to have been buried. I’ll reserve judgement for now, but it doesn’t look good,’ he said.

John Whiting, head of personal tax at Price Waterhouse, said: ‘This just formalises the swapping of information, but it doesn’t look good that we weren’t told. If people don’t make a clean breast of their tax after this, it’ll mean greater prosecution costs for the Revenue.’

Leader, page 12; Legal analysis, page 20.

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