I have long argued, as have others, that tax avoidance is a supply driven market. Without the activities of what Prem Sikka calls the pinstripe mafia then there would be little of the tax abuse that has plagued society.
Now, at long last, and decidedly late, the government has decided to crack down on the suppliers of tax abuse. A new consultation on the issue was launched yesterday in the forward to which my old friend (sic) David Gauke MP said:
There is evidence that many mainstream tax advisers are increasingly unwilling to advise clients to undertake tax avoidance. For those who persist in promoting avoidance, we expect them to be transparent with HMRC about what they are doing and transparent with their clients about the risks involved in undertaking tax avoidance. Reputable advisers recognise it is their professional responsibility to be transparent and we will not tolerate promoters who sidestep their responsibilities.
Those promoters are out of step with the sector in which they work, with the vast majority of tax advisers keen to distance themselves from the few high-risk promoters. They are also out of step with society at large, which has made it clear there is no tolerance for tax avoidance.
Through new proposals to:
ï‚· identify publicly high-risk promoters of avoidance schemes;
ï‚· isolate them from mainstream advisers;
ï‚· use information powers to get early information about their products; and
ï‚· make it clear to their customers who they are dealing with
we will make it significantly harder to market avoidance in the first place.That will be underscored by significant new penalties for failure to comply with the new regime and higher standards for reasonable excuse and reasonable care that will apply to attempts to sidestep it.
The intention is clear: the purveyors of abusive avoidance will be labelled as such. I strongly suspect that some I think fit the category will not get the label, but this is a step in the right direction and one that I have called for over a long period. It would be churlish not to welcome it now the process is, hopefully, underway.
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On an admittedly quick read, this seems more aimed at ‘cowboy’ advisers getting taxpayers to enter into schemes that have ‘negligible probability of working’, rely on ‘non-cooperation with HMRC’, and concealment of facts rather than something that will stop the Big 4.
I say this because typically the Big 4 promote ideas to multinationals that have more than negligible probability and are backed up by opinions — both internal and counsel’s opinions etc — and don’t, in my experience, rely on non co-operation with HMRC or concealment of facts. So they wouldn’t appear to fit the description of ‘high risk promoter’.
So it is a step in the right direction. In particular it will help protect vulnerable/gullible people from cowboys, which is a good thing in my opinion. As an aside I think some intermediaries are also gullible/vulnerable and often don’t realise that what they’re promoting is as high risk as it actually is — I guess there’s an argument that they need protection too.
But it doesn’t seem to me that this will stop the Big 4 from promoting their tax avoidance ideas to big multinationals and the current disclosure rules for tax avoidance schemes are very targeted so mean a lot of ideas don’t have to be disclosed. I certainly get things come my way still and no mention of them being disclosable!
I agree
As I said, it will not target all this I think appropriate – you name them!
Maybe I should have merely alluded and said the ‘pin strip mafia’.
HMRC helping to “freeze out” the little man ?
One of the advantages of having taxation and banking run by the “Big4” ?
HMRC are only freezing out the bad little men – the good ones should be fine.
This little man is quite happy to be frozen out of a market from which I specifically excluded myself years ago.
I know a lot of ‘little men’ i.e. top 60 firms in London who are happy to sell proprietary schemes which are backed with a magic circle opinion.
They always attract commissions for selling them, which are (nearly always) non-refundable if the scheme fails. And they (frequently) end in tears for the client when HMRC attack the scheme, or a finance act kills the benefit within 12 months of adoption.
Three ideas:
1) Prevent accountants from indemnifying themselves fully against the scheme failing. If a scheme fails then the accountant should be liable unless they can demonstrate they understood the mechanism for the scheme’s operation and could show on balance it should have worked.
2) Get the GAAR on the statute books ASAP.
3) Ban audit firms from selling tax schemes to audit clients, unless they are able to audit the likelihood of scheme success. If the auditor is concerned that the scheme may fail, they should get the client to make a provision for the tax saved, and provide narrative disclosure of the issue in the accounts. Otherwise they resign.
Seems like basic professionalism to me.
The GAAR is on the statute book
What we need is my version