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HMRC extends consultation following tax advice outcry

HMRC has extended the consultation period for draft legislation on tax advice following industry outcry.

The news comes after tax experts called on HM Revenue & Customs to redraft proposed legislation on penalties for tax agents after fears that advisers could be caught and concerns over the short timeframe for responses.

HMRC published the draft legislation on February 8 and set the deadline for responses as March 3, but has now pushed this back to April 28 following pressure from industry bodies.

The change follows an urgent meeting called by the Institute of Chartered Accountants of England and Wales and the Chartered Institute of Taxation with HMRC.

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

Experts say the draft legislation appears to apply not just to illegal actions but to any advice that could lead to a tax loss to the Treasury – such as suggesting someone take out an Isa.

The penalties could be as much as 100 per cent of the tax saved by the client as a result of the advice.

The CIOT says the way the legislation has been drafted could theoretically mean a newspaper writing a ‘top 10 tax tips’ feature or someone offering tax advice as a friend or a welfare adviser would be likely to be breaking the law.

HMRC insists the legislation is not intended to catch honest advisers, but rather those engaging in fraud or dishonesty, but Mark Lee warns that “anti-terror laws are already used in circumstances way beyond their original intent” and says that “sadly, it is much the same with tax law”.

CIOT president Andrew Hubbard says: “We are pleased to note that HMRC have moved quickly to respond to the concerns which we raised about the draft legislation.”

An ICAEW spokeswoman says: “HMRC confirmed that the intention was to provide legislation that reflected what was said in the December 9 2009 consultation document and that it is only intended to apply to those who have been involved in what amounts to fraudulent or dishonest behaviour.

“Following our meeting, HMRC appreciates that the draft legislation has caused major concerns.

“It has agreed to extend the consultation deadline so as to allow time for further examination of the legislation.”


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There are 18 comments at the moment, we would love to hear your opinion too.

  1. Just shows what a state the government are in !!

  2. HMRC insists the legislation is not “intended” to catch honest advisers.I presume what they mean by that is that its just a bonus when it does.


  3. My understanding of HMRC rules with regards to tax planning is that tax breaks, allowances and tax free investments can be employed to avoid tax which is legal.
    Tax evasion however is illegal – are HMRC now saying avoidance is illegal, it needs to get its house in order.
    Tax advice is always based around current tax systems, tax advisers cannot control HMRC’s future policies so how can that be lawfully giving bad advice.

  4. Bureaucrats will always seek to extend their powers so that they can get their sad jollies by striking fear into everybody else. No one in government is properly scrutinising the bureaucracies which we expect them to control. This particular government is so power hungry itself that it seems to be happier taking its bureaucrats along with it in extending both sections of the state’s ability to terrify people going about their ordinary lives.

    Lord Clyde said in his 1929 judgement in Ayrshire Pullman Motor Services v Inland Revenue Commissioners

    ‘No man in this country is under the slightest obligation, moral or other, so to arrange his relations to his business or property as to enable the Inland Revenue to put its largest possible shovel into its 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’

  5. Nothing surprises me with this Government. Labour have always suffered from a lack of intellect, everything is knee jerk reaction. They tinker with everything and ruin everything. They don’t even have a clue as to how many illegal immigrants there are in the UK but what is obvious is that there are fewer people paying tax to provide for ever increasing people on benefit. When will they realise that immigration should have been controlled years ago but it’s too late now. Immigrants have poured in for the welfare state with its education, hospitals, handouts and democracy which was admired throughout the world only to destroy. Politicians have much to answer for but whilst they are only in it for the money and the glory we are doomed. This government has no direction, morals or ability. They provide no service to British citizens, they provide no leadership. Brown will probably be judged by history to be the worst prime minister of all time and guess what? He wasn’t even elected!

  6. How can HMRC say that they are not trying to catch advisers and their clients who take advantage of tax avoidance rules, yet they have just won a court case to retrogressively tax expat Robert Gains-Cooper up to £30 million even though according to IR20 he is not a UK resident. Their case was based on the subjective view of the court as to whether he had ‘cut his ties’ with the UK, even though he spends less than 91 days a year in the UK.

    HMRC are under enormous pressure to raise revenue for Gordon Brown’s irresponsible spending spree, which is why they are going after everything from Shooting Syndicates to clubs to try and raise revenue.

    Perhaps they should follow the Tories proposal on Financial Advice and impose a levy on tax advisers to employ a few more Civil Servants to give the public advice on how to arrange their tax affairs without reducing their tax liability?

  7. I once had an inspection and the taxman told me that I had to treat a financial newspaper I had bought for 32p as a capital purchase! He was supported by his boss. I for one do not trust the HMRC, which is why I am ticking the anonymous box. I would suggest that all other respondents take the same precaution!

  8. Incompetent Regulators Awards Team 18th February 2010 at 2:46 pm

    I wouldn’t trust HMRC as far as i could throw them.

    The manesty thing is a great example they offered only 10% penalty to the offfshore accout holders only to find when they put their hands up they got fully investigated. I know because i know this happened to a closed friend of mine.

  9. Incompetent Regulators Awards Team 18th February 2010 at 2:47 pm

    I wouldn’t trust HMRC as far as i could throw them.

    The amnesty thing is a great example they offered only 10% penalty to the offfshore accout holders only to find when they put their hands up they got fully investigated. I know because I know this happened to a closed friend of mine.

  10. As with almost everything this government ever does, they are left saying “oh, we never thought of that”…

    Useless, useless idiots led by the biggest idiot of all…and previously by a war criminal…

  11. The terrorist legislation was NOT meant to result in the extradition of someone with Aspergers who tapped in to the Pentagons’ computers and yet it did.
    The Natest three were convicted of NO crime in the UK and yet were extradited to America using Terrorist legislation where they then had to plea bargain in order to see their families whilst awaiting trial which is not a practice of Englisg law.
    The Geneva convention requires that prisoners are treated according to the law (and I believe that is the law of the troops capturing the individuals, not of the host country) and yet in 1945 we forcibly moved Cossaks who’d fought with the White Russians against the Bolshevicks including women and children, because in WW2 they’d fought on the Axis side which was a clear breach of the Geneva convention and nearly resulted in a mutiny of Scottish troops in Austria who suspected what would happen to the Don Cossacks as a result of their earlier resistance to Stalin.
    Saddam Hussain was captured by British and American special forces, we have NO death penalty and yet as handed over humiliated in public on someone mobile phone and then hanged.
    HMRC need to state what is and is not Legal and stick to it. Otherwise like Saddam and the Cossacks, if we have UK regime change, individuals might be held to account to as they should be.
    This government is a bunch of control freaks, not interested in the rule of law, they beleieve they are always right and if the law does not fit, they’ll back date it until it does….
    Moses managed with 10 commandmants. This goverment should go back to basics and make sure they get the first 10 right as I’m not convined they can do even that!

  12. I was approached by an old lady caught by the non disclosure rules becuase when she’d been living in Spain in the 1980.s she opened an offshore (Isle of Man I think) bank account becuase she didn’t trust the Spanish banks at the time (Don’t forget the 1980’s nearly saw a military coup in the Spanish parliament). She subsequently got paid interest on her current account and when she moved back to the UK, she continue to do so. her S/os were paid from the Isle of Man account (HSBC I think) and being nearly 90, she did not want the hassle of changing everything bakc to the UK when she returned following her husbands death.
    She got these threatening meaningless letters from HMRC (partially sighted too) and her daugfhter ran to me for help. I had a quick look and said if anything she might have a coupel of hudner pounds owing to HMRC over a 7 year period and I’d see if they’d accept an offer of a sum in full and final settlement rather than waste my clients time and money gettting me to calculate it to the penny.
    You can guess what they said and when I did spend the time going back and calculating it as accurately as they insisted, she owed them less than I’d suggested they offered, so No one WON.

  13. Whilst I do not disagree with the general view on the greed of the Govt I don’t think there is any issue on advising on IHT. Generally, the advice given does not result in a tax loss to the revenue as this is paid from the insurance policy written in most cases. Where the legislation is aimed is at those individuals who assist in tax evasion, and it is only fair that they should share in any penalties occurring.

  14. Sorry Neil, I have to disagree as most of our IHT planning is achieved by adjusting assets, gifting etc and NOT by arranging a life policy.
    Even if it was arranging a life policy, then the advice is to place the life policy in trust so as not to inflate the IHT pot, so yet again, if the legislation is so loosley worded (as is being implied), life policies placed in trust could fall in to this pot.
    It does not matter what the inetntion is with laws, it is how they can be used. In this case it could be to get back at someone legally using this as you cannot legally get them on something else and this is increasingley what we are seeing happen.
    Don’t forget Al capone was done for tax evasion in the end, not for the crimes they wanted to get him on.

  15. backtracking because of yet more beurocratic arrogance from these ******. rant over, at least we can try and influence this now, i for one will continue to shop at tescos now

  16. HMRC if you want to save money I’ve got a better idea than this. Stop paying out so much in benefits.

  17. For HMRC to tell us that the proposed legislation ‘is not intended to catch honest advisers’ is absolute rubbish.
    HMRC has always stretched every bit of legislation to it’s ultimate limit and sometimes beyond!
    Paraphrasing what I was once told by the Revenue, when questioning a particularly stupid situation with regard to IHT, ‘if Parliament had not intended ………… then it would have written the legislation differently. If you disagree then you can take us to court’
    Cost my clients the best part of £100k as they did not have deep enough pockets to mount such an action and the Revenue knowing this always push the boundaries as far as they possibly can.

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