HMRC clampdown continues and turns attention to advisers and enablers of tax schemes

Are days numbered for ‘racy tax planning’ firms?

The accountancy profession could see a whole tier of firms collapsing or merging themselves out of existence as the full implications of the penalties for the promotion of tax avoidance schemes hit home.

That’s the message from Brian Burke of business restructuring and insolvency specialists Quantuma.

Brian Burke, a director at Quantuma, has tracked government policy on tax avoidance as it has evolved, and suggests legislation to be introduced has a very broad scope in allowing advisers, accountants and lawyers to be targeted.

“While some experts have suggested that new measures to tackle tax avoidance will have a limited or negligible impact, we are of the view that the recent changes have taken huge strides towards eradicating tax avoidance,” he said.

“New measures extend and reinforce those that have gone before them. They need to be considered as part of a suite of tools that are now available to HMRC rather than individually and in isolation.”

The areas of strengthened rules in the Budget on disclosure of promoted tax avoidance schemes, a requirement to those offshore to correct previous non-compliance and a new penalty for promoters and facilitators that fail in the Courts are not designed to generate anywhere near the sums of the Accelerated Payment Notices enacted in the Finance Bill 2014 or indeed the loan charge provisions of the proposed Finance Bill 2017 that will then be applied in April 2019.

He said: “Those were designed for the heavy lifting. The new measures, including penalties for professionals and advisers, are part of the finer touches.

“Each has its place, and with every measure one less corner is left in the shade and for those who fall foul they will find they have considerable implications.”

The tough financial penalties for professionals who assist a taxpayer or business to use a tax avoidance arrangement that is then defeated by HMRC was flagged in last year’s Autumn statement.

It is expected to raise £115 million over the next five years – not a huge sum in itself.

But, as Brian points out: “How many professionals will be left that are willing to recommend tax avoidance? This was once a considerable industry in its own right.

“Advisers, accountants and lawyers will now work toward the aims of the Government and HMRC and actively prevent tax avoidance.”

For those professionals who have, or continue to, enable they will now be faced with fines of up to 100% of the tax their client avoided.

The government has said it expects these penalties, which comes into force in July, to raise at least £10 million in the coming tax year, rising to £50 million in 2018-19.

That’s over half of the £115 million expected to be raised by April 2019.

He adds: “While it is clear there are practices and advisers to whom this legislation would have been applicable that are no longer operating, there are others still actively working with their clients.

“For those that are continuing to enable and support there is a very broad scope that allows lawyers, accountants and advisers to be targeted.

“Those who have a legacy of having engaged, where a scheme is yet to be defeated and clients have not yet sought settlement, may be caught if and when HMRC defeat the schemes.

“In both instances, they will soon be facing a very real threat with considerable financial consequences,”.