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IFA tax avoidance penalties confusion as Govt draws blank on new rules


The impact of new Government rules that could class some financial advisers as tax avoidance “enablers” remains unclear after HM Revenue & Customs has been unable to provide estimates over the penalties it expects to levy.

The Government confirmed in December after consultation that it planned to push ahead with new penalties for those who “profit from enabling abusive arrangements”, including IFAs, of 100 per cent of the value of the tax avoided.

While the Government said that “the regime will describe those who enable avoidance and distinguish them from those who simply provide second opinion advice to clients on arrangements designed or enabled by others,” it has made it clear that the whole supply chain will be subject to penalties, including where IFAs market schemes designed by promoters.

‘IFAs as enablers’: How HMRC will target advisers behind tax avoidance schemes

The measures contained in the Finance Bill 2017 were temporarily pushed back due to the election, but are still set to be introduced shortly. They are expected to raise £50m by 2018/19 and a total of £115m by 2021/12.

However, the Government is unable to isolate what impact the measures will have on IFAs compared with lawyers, providers, accountants or others that could be hit with fines.

Money Marketing asked HMRC to provide analysis on how many IFAs are likely to be subject to the new penalties and the total volume of tax avoidance enabled by them.

In response, HMRC said it could not provide this information.

It added: “To better understand the implications of the proposed enablers penalty, when developing the measure we engaged with a variety of stakeholders, including those involved in the provision of financial advice, and considered the impact across all enablers including IFAs. The impact of the proposed measure was then modeled and costed using a typical avoidance model involving the expected range of enablers, including but not limited to IFAs.”

The Government’s response to the consultation shows that it discussed plans with The Association of Professional Financial Advisers – now the Personal Investment Management and Financial Advice Association – and The Alternative Investment Management Association.



Fines for tax avoidance enablers to raise over £100m

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HMRC reaffirms support for tax avoidance scheme measures

HM Revenue & Customs has reaffirmed its commitment to using accelerated payment notices to combat tax avoidance schemes as it releases updated guidance on how it intends to use the penalties. Accelerated penalty notices order individuals to pay disputed tax amounts upfront before HMRC issues court challenges over contested tax avoidance schemes. HMRC re-released its factsheet […]


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There are 5 comments at the moment, we would love to hear your opinion too.

  1. Honestly this simply highlights how with the politicians muddying waters all the time, what is “tax avoidance”?

    Because if nothing else “tax avoidance” is legal, whereas tax evasion is not. As such I presume they are talking about “aggressive avoidance”, but given that they have yet to make any substantive attempt to define what they call aggressive avoidance, this just leaves everything wide open.

    Maybe they think that the within the “spirit” of the law idea is good enough, but given that this relies on people being able to interpret what politicians actually meant at any given time, this could be problematic.

    Must admit I’ve been more than a little worried about the lack of push-back from providers and advisers about this muddying, because it simply leaves HMRC as judge, jury and executioner. This happening at the same time that HMRC has been more politicised than at any other time in it’s existance.

  2. Unfortunately, ‘legal’ doesn’t apply when HMRC are seeking to boost the books.

    We’ve already seen examples elsewhere with the self employed & people working for umbrella companies, operating clearly within the boundaries of the law where HMRC has disregarded what is legal and has issued Accelerated Payment Notices under the pretence of tax avoidance.

    APNs have no right to appeal and the Human Rights Act cannot be invoked to contest it so if you get an APN for £100,000 then you have to pay it within a very short period of weeks or be bullied by HMRCs aggressive behavioural tactics to the point you’re looking at bankruptcy or even suicide (there are a few known cases of this sad outcome)

    Earlier in the year, the Treasury Select Committee slated HMRC for their reckless behaviour and attitude but yet nothing has been done to stop them.

    HMRC won’t clarify a situation as then that limits them being able to issue APNs at will and people can form arguments against them. If you don’t know what you’re guilty of, you can’t fight it.

    Until a government or industry body tackles HMRC on this, nothing will happen.

  3. Duncan,
    It’s actually not that difficult to understand. The Government has clearly defined that tax avoidance is “bending the rules of the tax system to gain a tax advantage Parliament never intended. It often involves contrived, artificial transactions that serve little or no purpose other than to produce a tax advantage.” This is taken from an official Government document that can be found on the Govt website with a simple google search!
    Are you referring to some of the schemes that involved transferring employment to the Channel Islands or Isle of Man and structuring payments as loans that I have come across; or with umbrella companies are you perhaps referring to this one involving the Anderson Group?

    • Kevin, It goes much wider than just those impacted by partnership, EBT and other trust schemes however because of the negative backlash towards reporting anything tax related where HMRC may be seen to be abusing powers, most of the cases go under the radar.

      In your response to Duncan, I don’t believe it is easy to understand as you need to define ‘bending the rules’, surely if a rule is not broken it is either Legal or it is not a well defined rule and not fit for purpose.
      If interpretation is used as most of this is, then is it wholly unfair to all those deemed guilty without trial or appeal. Individuals can’t afford FTT fees which is why HMRC bully the little guys rather than tackling corporations.

  4. The Govt. didn’t do so well obtaining information about avoiders/evaders in offshore accounts from far-flung tax havens, or even the Swiss banks. Time to choose a soft target.

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