Yesterday's blogs gave rise to a lot of comments, especially those on tax avoidance by large companies and a legal decision on the duty of an accountant to make their client aware of opportunities for tax abuse.
In both cases those commenting show the characteristics of so many usually associated with the right when it comes to such issues, and that is a literalistic approach.
On tax avoidance I related total losses to corporation tax liabilities of the companies who were avoiding whilst making clear that the losses could arise on other taxes. I also interpreted the data in the light of the Revenue's obviously wrong information on tax avoidance in the tax gap. That use, and the extrapolation of the data caused grief to some: it seems that illustration is not permitted. Only literal fact is allowed.
And with regard to the court decision the same was seen: I was accused of offering opinion on what the ruling might mean. That's what I do. I commentate. I interpret. I suggest consequences. I then propose action to remedy problems. But for the literalists that was all too much. The judge had not said what I said and so I was wrong.
Most of those commenting look like they come from the tax profession, a profession where literalism has led to abuse for far too long. Maybe those commenting have not noticed that the world of tax is changing. It's time they did. Literalism is over. Now you have to use judgement. It looks as if for some that may be a very uncomfortable experience.
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Richard, what you said was:
“First, let’s note that £5 billion of extra money was raised from just 381 large businesses in the UK in 2011-12….
shortly follwed by:
“…since just 381 companies were seeking to avoid £5 billion in tax”
You directly equated tax adjustments made as a result of the compliance units’ work with attempted tax avoidance. That is simply not correct, and all I am saying is that if you start with a flawed premise like that then the rest of your arguments lose an awful lot of force.
Only a pedant would think so
No, I don’t agree. You are in the fortunate position of having the ear of the public on the tax avoidance debate. Unfortunately, an ill-informed debate is worse than no debate at all. Your conclusions yesterday on the tax gap simply didn’t follow from the figures. Basing your arguments on guesswork and rhetoric only serves your own purposes – it detracts from the informed debate. It’s easy to dismiss that approach as being pedantic, but it’s more difficult to ensure your arguments are backed up by fact (or are at least reasonable inferences from fact). You seem to assume that everyone who disagrees with you is a supporter of tax avoidance, but that’s not the case either.
Neither of your assumptions is true
I illustrated information, I think fairly, with caveats stated
This sounds like a debate on religion versus science. It’s not so much a literal approach but just good interpretation of data and facts. Richard, I regularly find it your sheer chutzpah astonishing when coming up with your conclusions and that’s what keeps me as an amused reader. It actually has touches of genius and especially your approach to developing a narrative.
I suspect this attachment to literalism is another reason why the Right find themselves at odds with the EU and EU law, for every EU Law and Directive starts with a “Preamble”.
This Preamble – which can be quite lengthy – contains phrases such as “Whereas there is consequently a need to make more flexible arrangements etc” which together offer directions on how to interpret the EU law or Directive.
And this interpretation is always in a “purposive” direction, looking far beyond even the old “mischief” rule, which was sometimes nearly as narrow as the literalism beloved of 19th century judges, to the purpose behind the piece of legislation. So, Michael Meacher’s and Richard’s General Anti-Avoidance Principle law is thus very much in line with EU law.
I believe UK law should adopt the EU preamble system, rather than the usually feeble “interpretation” clause method of tacking on a late clause to an Act – sometimes only in an attached Schedule – which rarely says much more than the equivalent of “black means black and white means white”.
I agree and have argued as such for a long time
So have I – apart from the GANTIP thing, which would of course be redundant in such a situation.
This is childish. You commented on the basis of The Times’ report of a judgment and the Times got the details of the judgment wrong. The fundamental point was that you claimed the court said the client should have been advised to undertake a tax avoidance scheme. It didn’t. The court said the client should have been advised to seek specialist advice, and that would have resulted in him undertaking a tax avoidance scheme (hence damages for the client). They are two different things. There is not subjective question of interpretation – it’s simply what the judgment said, and you got that wrong. It would be mature of you to admit that and move on, instead of attacking people for “literalism”.
Only a pedant could make that distinction
The judge said the accountant should have made sure the client could undertake abusive tax arrangements, had the right to do so and the accountant was wrong to not make them available
That’s the practical interpretation of this and is the one that everyone will have to follows – and respectfully I got this 100% right in that respect
You – and all the others – are 100% wrong as to what this ruling means
It means an accountant must always make a client aware of how they may abuse or risk being sued and no other possible interpretation is available
This has been debated enough – tax abuse is abuse whatever you wish to call it and however you wish to describe me
The Times was right, I am right and my sources are right
Your sources are irrelevant. The only question is what the judgment says – because that is how the law works.
The judgment says that the accountant accepted the obligation to give tax planning advice, but did not tell the client he might be a non-dom and should take specialist advice, and that was negligent. The client was then given damages on the basis the adviser would have told him to participate in a certain tax scheme, and the client would have done that (i.e. this point went to causation, not the duty of care). This seems wrong in law to me, but that’s not the issue here.
You are taking this to mean that accountants have a duty to advise clients to enter into tax schemes. That’s not what it means at all. If the judgment is upheld then it will still be perfectly defensible for an accountant to say “I’m giving you tax advice; you’re a non-dom and this is how it works. There are some aggressive schemes out there that purport to save you more tax but I don’t think they’re appropriate – if you disagree you can of course go to someone else” (and this is exactly what one of your commentators does – good for him). But not acceptable for an accountant to accept he is advising on tax and then not mention that his client is a non-dom and this could have consequences. That would be just as wrong as a criminal lawyer not telling an obviously guilty client about possible defences. I don’t regard this as a change in law, and don’t think it is surprising.
If you disagree with me by all means quote the part of the judgment that supports your view, but please don’t engage in silly ad hominems.
It would be sensible for you to gracefully admit you were misled by inaccurate reporting. It would be unfortunate if any accountants reading your original blog entry start to think they have to advise clients to enter into aggressive schemes to avoid tax. Not correct in law, and not a result you intend…
Oh for God sake – understand I am saying that the implications of this law are appalling and have to be changed
I’m not denying its law
It’s bad law
Are you really daft enough not to understand that?
I work to challenge and change the law
You may comply
I change
Get real
And stop promoting abuse
The implications of this law are fairly small, really.
Reading the judgement, what we have is a client who was actively asking for planning schemes. The advisors pointed him in the direction of one that worked, but apparently neglected to take account of his particular circumstances and so didn’t point him at schemes that might have worked.
The main point I take away is that if I don’t consider all the facts of a client’s situation then I might neglect something important, which isn’t really news to me.
The smaller point is that if a client asks me about avoidance schemes I ought to refer him to people who might be able to help him with one, which is probably what I’d do from a relationship management perspective anyway – though only after having a frank talk about risks and reserving the right to say “I told you so” when it fails.
That’s unfair and beneath you. You’re saying that under current law accountants have a duty to advise their clients to avoid tax. I’m saying they have no such duty, and an accountant can quite properly tell their client he or she doesn’t advise entry into tax schemes. Having read the case (and knowing the law of professional negligence) I think that is right; you may disagree, but quite how you think it is “promoting abuse” defeats me.
Because quite clearly you’re wrong?
Explain why my reading of the judgment is wrong, or admit you are wrong. Continued assertion and insult is not an argument.
You really have not read a word I have said, have you?
One thing missing from the Times story – and Richard’s post – is that the claimant in the case explicitly asked for advice on avoiding a liability, and the defendant provided some – but the advice was inappropriate and took no account of the client’s particular circumstances.
Absent the explicit request for advice, the situation would be very different (in my view).
Thank you for proving my point
What you are really saying is if the client asks for mitigation an accountant as to offer any scheme available – exactly as I said all along
And meaning I have exactly understood this case, as did The Times
Case closed
No: If the client asks for advice on avoiding tax, AND you decide to give them advice you should make sure you do it properly and suggest an appropriate course of action..
On the other hand, if you say that they should take advice elsewhere because you’re not in a position to advise them then you’re OK.
Wrong interpretation – and obviously so
The message is clear – you must offer abuse or refer to those who do – as I said all along – the only possible interpretation
How can it be the only possible interpretation, when I have come up with another which other people are happy to accept?
And which is based on the judgement rather than on the article in the Times, to boot…
You offered it
And I reject your literalist interpretation as being valid
I’ll assume that’s a typo!
As I’m the one who’s going to be affected by this, having clients who occasionally ask if they can reduce their tax bills, I think I’ll stick with the judgement.
Is not the principle here the same as for a financial adviser? And provides the basis for valid claims for compensation? A professional held themselves out to be capable when their actions showed they had been negligent? Should we change the law for all claims of professional negligence, maybe refining it to include ethical factors?
Is it negligent to not advise a person to abuse the law?
Respectfully Mr. M.,
I wonder what a barrister might think of that question as he or she advises the client to make use of insanely narrow technicalities to get off…..
Perhaps your readers would be interested to know that nowhere in the judgement does the judge use the words ‘tax abuse” – in fact the word “abuse” isn’t even mentioned.
The phrase “tax avoidance” is used 14 times in the judgement, mainly by defendants counsel and defence witnesses. The judge however only uses the phrase once himself when he says:
“…In my view, it is strongly arguable at least, that BWP was not tax avoidance but tax mitigation. Indeed, the transaction which has to be looked at is the sale to Phoenix and that transaction did not have as its purpose or one of its main purposes the avoidance of liability for CGT or Corporation Tax.”
It therefore beggars belief how you are able to conclude that the courts finding was that there is a legal duty upon accountants to advise their clients on “tax abuse” (whatever this phrase may mean).
Let me add that usually when people try to comment and interpret intelligently on decided cases they tend to quote from the case to support their hypotheses. This appears to be absent in what you call a commentary and interpretation (frankly I didn’t know you were an expert on the law of negligence). You go nowhere further than the journalist who deliberately misinterpreted the decision (if he actually bothered to read it).
As a matter of fact that is what accountants will consider the judgement means – because, as I have said, that is the only possible interpretation
And anyone who can think BWP tax mitigation is living in a world of make believe – as indeed the scheme was
The Times and I got this right. You (and the judge) got this very wrong
I know of one accountancy firm at least that does NOT consider that the judgement means that 🙂
The defendant essentially said “Yes, we can do you a tax avoidance scheme” and cocked it up. A very simple defence against this is not to say “Yes, we can do you a tax avoidance scheme”.
I’d have thought you’d be all in favour of the decision!
You miss out the essential point – that you then have to refer on
And that’s a deliberate or negligent omission in your comment
No, I don’t have to refer on at all. All I have to do is make it clear to the client that this is not a service I can provide to him.
Again, you are missing the point that in this case the advisor tried to provide the service and cocked it up.
The defendant is not liable for failing to refer the client to the right sort of advisor, it is liable for trying to act as the right sort of advisor when it was not capable of doing so and therefore gave the wrong advice.
If my client asks me to fix the boiler, I will not be liable for anything if I say “I’m not a plumber, you should go and find one”. I will however be liable if I say “Oh, I can fix that, what you need is some duct tape and a hammer” and he ends up with a flooded house.
No – the judge said a reasonably competent accountant should have known the scheme was available
He did not say a plumber should have – because no one would expect a plumber to know
You are misquoting, I presume deliberately to waste my time, so further comments will be heading for the trash box