Mark Lee sets out his opinion on tax avoidance:
[H]ere are what I call the Five Facts you need to know about tax avoidance schemes:
- Accountants should only promote such schemes if they are confident that they understand ALL of the risks and consequences for their clients;
- Accountants do NOT have to advocate structured tax avoidance schemes;
- Accountants who promote such schemes honestly will find that typically only around one in ten clients will proceed once they understand all of the risks;
- Accountants do NOT have to notify all clients that such schemes exist;
- Accountants are NOT at risk of successful negligence claims if they fail to alert clients to such schemes.
I completely agree with Mark.
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“4. Accountants do NOT have to notify all clients that such schemes exist;
5. Accountants are NOT at risk of successful negligence claims if they fail to alert clients to such schemes. ”
This is logically inconsistent. If 4 is correct, the accountant DO have to notify SOME clients that the schemes exist. In which case, they would be at risk of negligence claims if they didn’t.
But before we call these facts, it would be good to have reference to the caselaw that supports what seem to me like assertions.
I think it is clear that an accountant doesn’t need to advise on or advocate such schemes if he has told the client he will not do so (and allegedly 90% of clients don’t care, so it shouldn’t be a problem). But I’m not sure I would recommend an accountant to not tell his client about legal ways of reducing his tax liability and to not even tell the client that his advice would be limited in this way.
But then, I’m only a lawyer.
Sorry Paul – I don’t follow your argument re the interaction of points 4 and 5. If it helps replace the work “all’ in 4 with “their”.
On the TaxBuzz blog from which Richard has copied this list I added a note:”Do I need to expand or explain the justification for any of these? I’m happy to do so and also to receive comments from people with a different view.”
By definition the list is simply my view and it is informed by my work (in the past) as an expert witness and as a regular speaker on the subject of professional negligence issues for accountants.
Remember I’m referring to structured, what some would call ‘abusive’, tax avoidance schemes. That’s quite a different issue to simply advising clients on ways that they can reduce their tax liabilities.
My understanding is that, for a negligence claim to succeed, the claimant would need to show that the accountant did less than would any other reasonably competent accountant. The claimant would also have to prove that he would have undertaken the necessary transactions, even if fully aware of the risks, and that he has suffered a quantifiable loss as a result of not having done so.
I don’t believe that an accountant’s duty of care to clients generally includes an obligation to research all available tax avoidance schemes, their suitability for his accountants, their prospects of success and their status viz a viz HMRC challenges. Without doing these things an accountant would be in breach of his professional ethics to advise on such matters – hence my point 1 above.
Thus I would very willingly act as a suitably qualified and experienced expert witness to defend an accountant accused of negligence for failing to tell a client about a structured tax avoidance scheme.
I hope this explains the rationale for my fifth point above.
Mark,
I think the problem, from a legal perspective, is where the line is drawn between “what some would call ‘abusive’ tax avoidance schemes” (your words) and other, presumably more legitimate ways of advising clients on how to reduce their liabilities. because in your very words it is explicit that there is room for dispute over what is abusive and what is not.
I think it is totally acceptable for an accountant to say that he does not advocate schemes he personally regards as abusive, that such schemes in his view pose risks to clients and as such he does not advise in relation to such schemes. As long as a client knows what he is getting, he cannot complain subsequently.
I think it would be dangerous for an accountant to not mention such schemes to his clients and also to not mention that he was not mentioning such schemes. That was my only point.
Paul
I have long agreed with Mark on this issue
It’s right for an accountant to in general make clear they do not do tax avoidance – full stop – i.e. seeking to get round the law
I think the chance of being sued for refusing to do so very very low now – the law is not there to uphold tax abuse if fair notice has been given that the accountant has no intention of doing so
Especially as it is fundamentally unethical for an accountant to abuse the law – and his or her professional institute should provide expert witness evidence to prove they had no need to do so – but now I’m entering the realms of wishful thinking I know – but not what should be the case. It is long overdue that the professions said exactly what Marlk is saying – and that the spivs were made to look exactly what they are – spivs
And so what if that means the Big 4 are labelled spivs as a result
Richard
Surely you need a caveat on “fact” 5. If as an accountant you engage with a client explicity to mitigate his tax liability, then failing to do so would open you up to litigation. Equally you would be on dangerous grounds if you failed to protect the interests of your client simply because you did not like something.
The use of the term “abusive tax avoidance schemes” is interesting, as is the idea underlying the term “abuse the law” in the context in which Richard uses it. Not least because the fact that tax avoidance is perfectly legal is long settled. Whether something is abusive is irrelevant, but whether it is avoidance or evasion is something for a Court to settle.
I’ve posted a couple of further comments on the same theme on the TaxBuzz blog in recent weeks. Five more facts for accountants and also, today, a reference to HMRC Spotlights which I think further justify my position.
As regards Alastair’s comment – my apologies for not responding sooner.
I’m afraid though that we will have to agree to disagree. I’m firm in my view that failing to advocate ‘abusive schemes’ will not lay an accountant open to a successful negligence claim. I’ve explained why above (10.27 on 4/8).
I’m pleased to note that I am receiving increasing support for taking a stance and defending the position of accountants who are disparaged for their reluctance to get to grips with such schemes.