19 Jul Avantisteam Announced MPs call for crackdown on advisers behind unlawful tax avoi…
A cross-party committee of UK MPs has called for an overhaul of sanctions faced by financial advisers who promote unlawful tax avoidance schemes.
The group, including several former ministers and led by Labour’s Margaret Hodge, wants the law changed so that it would be easier for tax lawyers, accountants and advisers who promote such schemes to face criminal prosecution and increased fines.
They said in a report they were worried about legal flaws that mean advisers who help devise and market unlawful schemes rarely face punishment, encouraging sharp practices at a time when public finances are being strained by the need to support the economy during the pandemic.
“Unscrupulous individuals have long made a pretty penny by enabling highly dubious tax avoidance schemes. The enablers of these failed tax avoidance schemes are breaking the law, plain and simple,” Dame Margaret said.
“With a few simple changes, the law can be strengthened so that the enablers of egregious tax avoidance can be criminally prosecuted and properly fined.”
She added that “to shoulder the fiscal burden of the coronavirus crisis, we must all pay our fair share”.
The MPs are the all party parliamentary committee on anti-corruption and responsible tax, which is also co-chaired by Andrew Mitchell, Rupa Huq and Nigel Mills. It was formed three weeks ago.
The group is worried that while the users of failed tax avoidance schemes may be pursued by HM Revenue & Customs and the courts, those that devise and promote them rarely face any repercussions.
There are two relevant legal regimes: the common law offence of cheating the public revenue and civil penalties for enablers of defeated tax avoidance schemes. But the group said that both have weaknesses, which it is seeking to strengthen.
Among its proposals, the group wants to make it more practical for HMRC to prosecute enablers who break the law by changing the threshold used to determine criminal prosecutions.
An adviser can currently claim they believed that a scheme could be effective, which is difficult to disprove under the current regime, but the MPs want to change the threshold so the arrangements are deemed abusive if they cannot reasonably be regarded as a reasonable course of action.
Under the civil law regime, meanwhile, the group has recommended toughening the fines and again changing the threshold for advisers so that these civil penalties can be more easily applied.
The report said unscrupulous tax advisers promote schemes they know to be ineffective, “effectively daring HMRC to contest a resource-intensive tax appeal that could last years, potentially all the way to the Supreme Court, which it may well lose”.
The paper was researched by the Policy Institute and funded by the Joffe Trust and the Chartered Institute of Public Finance and Accountancy.