Guidance points on how to identify and address tax avoidance has been issued by the ICAEW for its members
ICAEW MEMBERS offering tax schemes that could be interpreted as aggressive could be held as bringing the profession into disrepute, under new guidelines.
The institute’s helpsheet, which sets out the hallmarks of avoidance schemes to consider for ICAEW members, warns that contrived tax planning is potentially against its code of ethics, despite earlier concerns from practitioners that they could be held negligent if they fail to draw clients’ attention to all available options.
Accountancy Age understands that the ICAEW has never undertaken disciplinary proceedings against a member for being involved in aggressive tax avoidance.
On 23 July, Exchequer secretary David Gauke announced at the Policy Exchange think tank that updated rules for the disclosure of tax avoidance schemes (DOTAS) legislation were under consultation. Under the plans, those providing aggressive avoidance schemes potentially compelled to disclose their clients to the taxman.
A general anti-abuse rule designed to clamp down on aggressive and contrived tax avoidance schemes is also in consultation.
ICAEW chief executive Michael Izza expressed concerns over that proposal, but has previously stated in his blog that tax avoidance is “beyond the bounds of what is reasonable”, and as such it is hoped the help sheet will clarify to members where on the spectrum particular schemes may fall.
A list of characteristics of avoidance schemes is provided in the help sheet. They include:
• It sounds too good to be true
• It involves artificial or contrived arrangements
• It seems very complex for what you want to do
• There are guaranteed returns with apparently no risk
• There are secrecy or confidentiality agreements
• Upfront fees are payable or the arrangement is on a no-win-no-fee basis
• The scheme is said to be vetted by a top lawyer or accountant but no details of their opinion are provided
• The scheme is said to be approved by HMRC (it doesn’t follow that this is true)
• Taxation of income is delayed or tax deductions accelerated
• Tax benefits are disproportionate to the commercial activity
• Offshore companies or trusts are involved for no sound commercial reason
• The involvement of professional trustees is claimed to guarantee success
• A tax haven or banking secrecy country is involved for no sound commercial reason
• Tax-exempt entities such as pension funds are involved inappropriately
• It contains exit arrangements designed to side-step tax consequences
• It involves money going in a circle back to where it started
• It involves low-risk loans to be paid off by future earnings
• The scheme promoter lends the funding needed
• There’s a requirement to take out insurance against the failure of the tax planning to deliver the tax benefits
The DOTAS consultation is due to run until 15 October, while the consultation on the proposals for a general anti-abuse rule closes on 14 September.