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.”