HMRC has never been shy in casting its net as wide as possible to foil tax
evasion – but its latest move has caused outrage among tax experts.
Advisers are warning that the “man down the pub” could be fined for
discussing tax planning, under draft legislation proposals for working with the
Industry experts say that the draft proposals are worded in a way that
suggests anyone talking about tax advice – even the public, media, or advice
bureaux – could face fines if the advice leads to a tax loss on the back of
“wrongdoing” for the Treasury.
Many have issued vigorously worded criticisms, and want the proposals to move
away from being too inclusive.
For example, Andrew Meeson, vice president of the Association of Taxation
Technicians said: “The parallel with anti-terror legislation which enables
over-zealous constables to arrest tourists photographing Westminster Abbey is
too striking to ignore; HMRC must not go down a similar route by painting the
definition of ‘tax agent’ far too inclusively.”
Around £25m a year is lost through wrongdoing – deliberate contrivance by
advisers to conceal client assets or by other failure to give an accurate
picture of the taxpayers’ circumstances.
The numbers may be small beer in terms of the billions the Exchequer hauls
in, but the implications for those providing casual tax advice could be severe
if the taxman takes issue with it.
So will the taxman rein in the wording of its controversial legislative
draft? The smart money would be yes, with so much ire among the tax community.
But HMRC is so far refusing to water down its proposal, saying: “Part of the
consultation looks at how to deal with the small minority who are prepared to
give dishonest advice to their clients…HMRC published draft legislation last
week, which would only apply where there is deliberate wrong doing meaning fraud
or dishonesty on the part of the tax agent. It would not apply to anyone giving
advice honestly, whether or not this reduces tax.”
The “Working with Tax Agents: the next stage” draft legislation closes on 3
March. The proposals could see any individual providing advice that leads to a
tax loss through wrongdoing, hit with a fine of between £1,500 to £50,000.
HMRC permanent secretary for tax Dave Hartnett recently told Accountancy Age
the taxman would stop short of involvement in overseeing tax advisers, but cases
of wrongdoing would have to be stamped out. “I don’t think we’re going to get
involved in regulating the profession – the representative bodies can do that.
But we will need effective measures in legislation to deal with rogue tax
agents. I don’t think there are very many of them, but there are some, and we
need to deal with them.”
To compound the situation Hartnett added that greater access to working
papers was more than a remote possibility.
“I don’t want to panic the tax world but I think this is going to be
something we’re doing on a regular basis,” he added. “[Advisers] want us to play
a part in sorting out rogue agents and I think we’re ready to play that part.”
Tax professionals have not only been indignant about this aspect of the
drafting. In just-released responses from advisers to the original consultation,
they warned that the taxman made just as many errors as advisers had been
HMRC added that also contained within the responses was a broad backing
of its crackdown on rogue advisers by the tax profession.
IN OUR VIEW
Is this a red herring? It seems unlikely that the man in the pub would
realistically be hit by this law, then again that doesn’t mean the law is right
in its current iteration. Tax lobbyists will be minded to keep an eye on other
contentious proposals, such as new rules on naming and shaming dodgy advisers.
Does Darwin's theory apply to taxation? Colin ponders...
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