Avoidance rewards could compromise independence
New president of Chartered Institute of Taxation issues warning
Rewards for advisers who steer their clients clear of tax avoidance could
compromise their independence, the new president of the Chartered Institute of
Taxation has said.
Accountancy Age revealed last week that the taxman was considering
doling out rewards to tax advisers who encouraged their clients away from tax
avoidance.
‘We want to leverage the benefits to advisers of reducing risk for their
clients,’ Geoff Lloyd, director of the central compliance directorate at HM
Revenue & Customs, had said.
But John Cullinane, president of the CIoT, responded that such a move would
‘undermine the independence of advice to clients’. He added: ‘I am not happy
with the idea of HMRC manipulating advisers with incentives. I find it
unacceptable, as well as vague.’
Advisers are responsible for outlining all the options to their clients, who
will then make a decision. Cullinane said that targeting advisers might not make
any difference to the decisions clients made.
Francesca Lagerberg, chairman of the tax faculty at the ICAEW, said that
advisers face potential difficulties. ‘If you don’t tell clients about avoidance
schemes, they can then turn round and say “I wanted to know about those
opportunities.”’
Some experts have long expected to see court actions against firms alleging
that they failed fully to notify them of the opportunity to take part in
avoidance schemes. Such a case would sharply expose the difficulties advisers
face.
Lagerberg said that an increase in investigations of clients linked to
advisers involved with avoidance was likely to be one way HMRC could pursue the
objective of rewarding other advisers whose work it approved of.
She said: ‘HMRC is spending a huge amount of time and energy on tax
avoidance. Advisers might well say “let’s go back to the law. Was it permissible
and appropriate?”’
Bill Dodwell, tax partner at Deloitte, has questioned whether any attempts to
reward advisers who refused to market avoidance schemes would be legal.
HMRC is set to outline what it regards as tax avoidance later this year. All
attempts to reward advisers are in their ‘early days’.