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Experts call on HMRC to redraft tax advice rules

Tax experts have called on HM Revenue & Customs to redraft proposed legislation on penalties for tax agents after fears that advisers could be caught.

Yesterday, The Tax Advice Network chairman Mark Lee warned that IFAs could be hit by penalties for giving tax advice under draft legislation which he says extends HMRC’s influence to penalise anyone who talks to clients about reducing tax liabilities.

HMRC insists that the legislation would only apply where there is deliberate wrong doing such as fraud or dishonesty on the part of the tax agent and would not apply to anyone giving advice honestly.

But experts argue that the legislation itself does not make this clear and should be amended to do so.

“The anti-terror laws are already used in circumstances way beyond their original intent. Sadly it is much the same with tax law.”

The Tax Advice Network chairman Mark Lee.

Taxbriefs editorial director Danby Bloch says: “The legislation needs to be defined far more clearly. As it stands it is very discretionary, which means it will be left to judges to decide.

“My guess is HMRC have started out with something that sounds very draconian so that everyone breathes a sigh of relief when the final rules come out.”

Mark Lee warns that there are many examples of legislation being used beyond its original target.

He says: “I have enormous sympathy with HMRC’s ambitions in this regard, however, I deplore the extent to which we are already taxed by legislation and only untaxed by concession and discretion.

“The anti-terror laws are already used in circumstances way beyond their original intent. Sadly it is much the same with tax law.

“There are already too many examples of where, having been asked to trust HMRC not to abuse their powers, that trust has been abused.”

Lee says the proposed legislation appears to have been drafted in a hurry.

He says: “It needs to be revised in a number of places – not least to make clear that it can only be applied to counter the real targets rather than only ’in particular’ those targets.”

A spokesman for HMRC says: “Tax agents play a vital role in the delivery of the tax system and the overwhelming majority advise their clients appropriately.”

HMRC says it is consulting on how it can work with the tax profession to ensure high standards among tax agents who are not affiliated to a professional body and how to deal with “the small minority” who give dishonest advice to their clients.

He adds: “HMRC published draft legislation last week, which would only apply where there is deliberate wrong doing meaning fraud or dishonesty on the part of the tax agent.

“It would not apply to anyone giving advice honestly, whether or not this reduces tax.”

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Comments

There are 6 comments at the moment, we would love to hear your opinion too.

  1. This looks like a ploy from HMRC to scare tax advisers away from any any sort of tax planning that costs the Revenue substantial amounts of money. Who would take the chance?

  2. Everyone should write to HMRC (powers.review-of-hmrc@hmrc.gsi.gov.uk) immediately, copying in their constituency MP asking for the draft legislation to specifically state that the definition of “Deliberate wrongdoing” (http://customs.hmrc.gov.uk/channelsPortalWebApp/downloadFile?contentID=HMCE_PROD1_029995 – Part 1 Paragraph 3) must be altered so that such activities as advising on Pensions, ISAs, VCTs and EISs are specifically excluded. Otherwise HMRC will certainly use this at some time in the future as a back-door way of attacking both consumers and professional advisers.

  3. Michael White CEO Emailmortgages.com 18th February 2010 at 9:48 am

    I always find it difficult to take seriously anyone who advises they have “enormous sympathy with HMRC’s ambitions in this regard”.

    Enormous Sympathy! Really?

    Getting back to the matter in hand, just another example of a government agency with too much autonomy. Someone will be surely be getting their wrists slapped as so many of the great and good who have influence at the highest levels, take full advantage of appropriately advised tax avoidance schemes. Alternatively, it may be a deliberate ploy….but I doubt it.

  4. Law Lord, Lord Clyde stated, ‘No man in the country is under the smallest obligation, moral or other, so to arrange his legal relations to his business or property as to enable the Inland Revenue to put the largest possible shovel in his stores. The Inland Revenue is not slow – and quite rightly – to take every advantage which is open to it under the Taxing Statutes for the purpose of depleting the taxpayer’s pocket. And the taxpayer is in like manner entitled to be astute to prevent, so far as he honestly can, the depletion of his means by the Inland Revenue’.

    Does HMRC concur?

  5. Typical HMRC

    Scatter allarm and uncertainty, threaten retrospective approach, prosecution , don’t define the rules –

    End result is

    Discord, opaqueness, uncertainty so they ( Judges/ HMRC ) can “interpret” the laws they haven’t made as it suits them.

    This causes delay in settling individual tax returns. This particular little “fishing” expedition is designed to achive the same thing except this time frighten the actual advisers ( who incidentally are constrained by another piece of legislation to provide clients with ” Good Advice”

    This is the way they harass the UK citizens and their Financial Advisers- with their approach to any tax efficient investments, making most of them unwilling to repeat the experience.

    As one of the earlier comments quoted from Lord Clyde – simply translated as we all have “human rights” to be able to pursue one’s livelihood and business with out undue state persecution.

    I am a “product provider” and If I can possibly reduce the tax take of this rapacious and profligate government by one single pound at every opportunity I get – it warms my heart and makes my day.

    Labout, based on its mindless class based hatred on any personal wealth at all , has always created opportunities for the tax planning industry by their very petty mindedness in regard to legitimate tax planning. 9/10ths of an adviser’s day is spent on “so ordering a client’s affairs….. etc”

    Leaving HMRC and the courts to interpret what is legitimate in tax planning is something which every right minded Adviser , product provider – supported by letters of support from their clients should has to fight – or their life’s blood is threatened.

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