Proposed Powers Could Criminalise Tax Advice

Draft legislation by HM Revenue and Customs (HMRC) could see accountants unable to offer their clients even the most basic advice, warns ACCA (the Association of Chartered Certified Accountants) today.

HMRC’s consultation on their draft legislation – called Tax Agents and Deliberate Wrongdoing – is controversial because it defines almost anyone in the financial system as a ‘tax agent’, and it classes any tax planning, including using government incentives, as ‘deliberate wrongdoing’.

Chas Roy-Chowdhury, ACCA’s head of taxation, says:

“ACCA is concerned that even revised proposals will target advisers who counsel on what HMRC call ‘unacceptable tax avoidance’. With no clear definition of what tax advice is ‘unacceptable’, there is a strong chance that advisers will be deterred from offering tax advice, for fear of laying themselves open to fines or more critically the business-paralysing removal of all their files and papers by HMRC officers.”

“HMRC has already promised to look again at the most controversial elements of their proposals, there is a very real risk that they will still want powers to fine and investigate accountants who give perfectly legal tax advice to their clients.”

“Potential offenders would be subject to a minimum personal penalty of £5,000, and HMRC could seize all their client-related documents and papers to look for evidence of this further ‘wrongdoing’.”

ACCA says that HMRC needs to work with the profession to ensure that any new powers will affect only agents involved in fraud or evasion, and not penalise advisers who simply take a different view from HMRC on the legislation. The Disclosure of Tax Avoidance Schemes regime already captures information on aggressive tax planning, so any further rules would duplicate the existing laws for no good reason.

“This draft legislation has not been thought through”

adds Chas Roy-Chowdhury.

“While ACCA was instrumental in persuading HMRC to look again at their proposals, we must ensure that we keep up the pressure. Any new law in this area must be focussed on tax agents who are misbehaving. It should not penalise advisers who are doing a good and valuable job in legitimately keeping their clients’ tax bills down. We look forward to a constructive discussion with HMRC to help frame a law which protects tax payers and the Revenue from fraud and dishonest evasion without restricting access to good quality advice.”

Revised draft legislation is expected after the General Election.

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