Advisers shop rivals as avoidance battle hots up

Link: Brown to clamp down on corporate tax avoidance

Tax advisers have resorted to shopping each other’s tax avoidance schemes, it has emerged, as the number of ‘aggressive’ arrangements disclosed to the Inland Revenue passed the 500 mark.

Government sources confirmed to Accountancy Age that the first few disclosures made to the avoidance intelligence unit were not received from the firms that devised them.

As well as notifying the Revenue of competitors’ schemes, firms of accountants, tax advisers and solicitors have been notifying the Revenue of their own schemes but only after selling them to clients. The practice prevents competitors from taking advantage of the same, usually highly complex, arrangements.

One tax barrister, who asked not to be named, said the first few schemes disclosed to the Revenue were from accounting firms disclosing tax plans from other advisers. Another tax barrister, Patrick Cannon from Rex Britten Chambers, said he was ‘aware of the rumours’.

David Cruickshank, head of tax at Big Four firm Deloitte, said he wasn’t aware of the practice but said that he had heard of at least one tax director who had been so ‘appalled’ by a scheme he was offered that he immediately tipped-off the Revenue.

‘We get information from all areas of the tax-planning world,’ said a Revenue spokesman. ‘There are all sorts of sources. Some come from accountants and some from company directors when they see something particularly offensive.’

The wide range of sources has contributed to the runaway success of the new regime. The Revenue has said that tax avoidance ‘costs the Exchequer substantial sums in lost taxes each year’.

The Big Four have been supportive of the new disclosure regime since its creation. While concerns were expressed over the potential workload it would create, the Treasury has consulted at length with the profession.

A third of disclosed schemes blocked
A third of tax avoidance schemes disclosed to the government since the disclosure regime got underway last year are now unworkable thanks to legislation brought in by the Treasury.

As a result, the ongoing battle between the tax planning industry and the Treasury has swung noticeably in favour of ministers.

A ream of new legislation was brought in by the government in Gordon Brown’s pre-Budget report, helping block between 160 and 190 different tax avoidance schemes.

An Inland Revenue spokesman said the department was ‘reasonably pleased’ with the result but was unable to estimate how much money it would help to recoup for the government.

The total number of schemes disclosed to the Revenue’s Avoidance Intelligence Unit since the regime came into force in September last year passed the 500 mark this month.

Tax experts claim that the government’s relentless pressure could prove the death-knell of the high-end tax planning industry.

One eminent tax barrister said the relentless clampdown and continued bad press for aggressive tax planning would lead to ‘far more discriminating clients’ and as a result ‘less work’.

Gordon Brown announced the new Avoidance Intelligence Unit in last year’s Budget speech.

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