Govt proposals could hit tax advice
Share
Draft legislation published by HM Revenue & Customs could penalise tax advice.
Draft rules published by HMRC last week, propose that tax agents who engage in “deliberate wrong doing” could be hit with a penalty.
HMRC defines “deliberate wrongdoing” as any “act that is capable (directly or indirectly) of bringing about a loss of tax” to the Government.
The Tax Advice Network chairman Mark Lee (pictured) has warned that IFAs have just two weeks to respond to the new tax penalties which could be imposed for giving inheritance tax advice.
Lee, who previously chaired the Institute of Chartered Accountants of England and Wales’ tax faculty, says the penalties could be up to 100 per cent of the IHT saved as a result of an IFA’s advice.
Lee warns that the legislation introduces a new, wider definition of “tax agents”, which extends HMRC’s influence to penalise anyone who talks to clients about reducing tax liabilities.
Lee says that previous publications by HMRC were thought to be focused on accountants and tax advisers.
The draft rules, published on February 8, follow consultation documents published in December. The consultation period to respond to the draft legislation expires on 3 March 2010.
Lee says: “Anyone who provides advice related to inheritance tax is a tax agent for this purpose. That will include many financial advisers, including those who are employees rather than principals. It could have very wide repercussions for those advisers who currently believe that HMRC are not interested in their advice. This is about to change.”
He adds: “The legislation introduces a new and very wide definition of ’tax agents’. It also contains sanctions meaning advisers will be personally liable to penalties for ’deliberate wrongdoings’ which include giving advice that involves a ’loss of tax’.
“The underlying fear here is because a ’loss of tax’ is defined as including any advice on reliefs or deductions that reduce someone’s tax liabilities. And inheritance tax is explicitly included in the definition of ’tax’ here.”
If you enjoyed this article, sign up here to receive daily email updates from Money Marketing and Follow @_moneymarketing
View results 10 per page | 20 per page | 50 per page
Readers' comments (45)
Julian Sunley | 17 Feb 2010 10:29 am
How ridiculous. So potentially by pointing out ways of legally reducing a client's tax bill we can then be held liable for reducing HM Treasury's coffers? If true then this would mean an unwillingness of Advisers to advise in this area going forwards and that would not be very TCF would it!
Unsuitable or offensive? Report this comment
Derek Vivian | 17 Feb 2010 10:29 am
This is a bit daft to suggest IFAs can't advise clients the way to minimise their potential tax liability! It is probably ultra vires and at present all citizens have a right to avoid tax, but not, of course, evade tax. And where would this stop! By recommending an ISA is preventing some tax going to the Revenue. I could go on!
Unsuitable or offensive? Report this comment
David Carter | 17 Feb 2010 10:36 am
So tax avoidance joins tax evasion as an illegal activity? Just to be safe, let's all stop advising on ISAs, pension plans, Discounted Gift Trusts.......
Unsuitable or offensive? Report this comment
Paul Bamsey | 17 Feb 2010 10:36 am
Surely if this is taken to the word of the law this would also cover pension advice and any investment advice, thus outlawing almost all advice that we give?
Unsuitable or offensive? Report this comment
Anonymous | 17 Feb 2010 10:37 am
If this is true, the Government has lost the plot and the lunatics are now running the assylum!
Unsuitable or offensive? Report this comment
Anonymous | 17 Feb 2010 10:40 am
I didn't believe this report could be correct until I read the actual draft legislation.
It seriously suggests that tax advisers will be penalised for drawing to a client's attention, the reliefs and allowances to which they are entitled, in order to reduce their tax bill.
This is a wee bit mental to say the least
Unsuitable or offensive? Report this comment
How funny!! | 17 Feb 2010 10:47 am
Wilkommen am Politzei-Staaten!!
Seriously scary, once again!! Chased by HMRC if you do, potentially sued by clients if you don't!!
Following on from Derek Vivian's comments, will this cover Salary Exchange, boosting pension conts, etc??
If FSA are monitoring pension transfer advice ... will they now start monitoring IHT advice as well ... ... and passing details of advisers to HMRC?? Watch out for investigations/witch-hunts into the advisers affairs next!!
On the back of the recent Robert Gaines-Cooper case, it's getting scary to be involved in tax advice!!
Retrain as Engineers, ladies & gents - Oz and NZ need them badly!!
Unsuitable or offensive? Report this comment
Wayne Baber | 17 Feb 2010 10:49 am
Tax avoidance will remain a legal activity, just that giving advice on it is a fineable offence.
LUDICROUS,
Is this the 1st of April or am i just reading this wrongly?
Unsuitable or offensive? Report this comment
Gerry Cooper | 17 Feb 2010 10:52 am
As others have observed, this is just plain silly.
The silliest bit however, is if Mr Lee, who clearly has his own agenda here, is really trying to suggest that legitimate tax advice can be regarded as 'deliberate wrong doing'.
HMRC would certainly not regard advice regarding legal, conventional tax mitigation measures in this way, and it is mischevious of Mr Lee to suggest that they might.
Unsuitable or offensive? Report this comment
NJH | 17 Feb 2010 10:54 am
I thought for a moment we had a 'flash forward' session to 1st April !!
Which bright spark thought up this arguement then...............
It sounds like the Govt can soon be prosecuted for circulating ISA information, annual gifting allowances and any tax breaks on their websites. All Building Societies would of course also be targeted for advertising ISA contracts. Perhaps all adverts and websites can no longer state such inflamatory words such as tax deferred, tax free, gross and net. All accountancy firms are then potentially in breach for setting out basic tax breaks / guides on their website. Soliciors and Will Writers are then also open to problems perhaps for suggesting a Nil Rate Band Trust is set up within a Will. Perhaps we are no longer allowed to even tell people they have a Nil Rate Band!
VCT and EIS will of course disappear, as will the £10,100 annual CGT allowance.
Perhaps the Govt should do away with the Nil Rate Band and all tax breaks, then increase personal taxes. That is probably the only way this Govt can pay off their massive debts and keep funding their crazy benefit system............by forcibly taking all the money they need from hard working citizens.
Unsuitable or offensive? Report this comment