Accountants, tax planners and advisers put on notice hefty fines coming
On the heels of two major tax avoidance victories totaling over £820 million comes word of new and stringent penalties in the UK aimed at professionals who actively assist tax dodgers in avoiding paying their dues.
This as UK Prime Minister Theresa May’s administration follows through on her promise to aggressively seek out tax dodgers and recover monies owed to the treasury.
On Wednesday (17 August) Financial Secretary to the Treasury Jane Ellison released the 32-page document inviting public comment on the proposed penalties which includes fines of up to 100 per cent of the tax the scheme’s user underpaid.
According to an HM Treasury statement, announcing the release of the document, “currently tax avoiders face significant financial costs when HMRC defeats them in court. However, those who advised on, or facilitated, the avoidance bear little risk.”
The statement said the UK government is acting to make sure that tax avoidance is rooted out at source and this action will target all those in the supply chain of tax avoidance arrangements.
Ms Ellison, in the statement, made it clear no one will escape penalty.
“People who peddle tax avoidance schemes deny the country of vital tax revenue and this government is determined to make sure they pay. The vast majority of their schemes don’t work and can land their users in court facing large tax bills and other costs. These tough new sanctions will make would-be enablers think twice and in turn reduce the number of schemes on the market,” the Financial Secretary to the Treasury said.
Consultation began on 17 August and ends on 12 October. A response document will be published later this year, and any legislative changes will be taken forward as part of a future Finance Bill, the consultation document stated.
Last week the HM Revenue and Customs announced that it had won two major tax avoidance battles worth more than £820 million in tax owed and interest. HMRC has secured more than £1.2 billion in disputed tax from wins in avoidance litigation since the beginning of April.
The consultation document, released on Wednesday said, clarifies the rules around whether proven tax avoiders have taken reasonable care to ensure their tax returns do not contain inaccuracies, making it simpler to enforce penalties when avoidance schemes are defeated.
“This is the latest of a number of government measures designed to tackle illicit finance and tax dodging. These include a new criminal offence for corporations that fail to prevent the facilitation of tax evasion, and new sanctions against those who engage in multiple avoidance schemes which are defeated by HMRC,” the release said.
According to the consultation document in the 2016 Budget 2016 the government announced it would be exploring further options to influence the behaviour of promoters and other intermediaries (agents, Independent Financial Advisers and others in the supply chain) who enable or facilitate the sale and use of tax avoidance.
“It also announced that it will consider the case for clarifying what constitutes failure to take reasonable care in relation to the application of the penalty legislation to avoidance cases which are later defeated,” the document stated.
Ms Ellison, in the foreword of the consultation document, said a small minority of people in the UK seek to exploit tax laws in a way parliament never intended and secure for themselves or their clients an unfair financial advantage.
“These tax avoiders undermine the public finances, and place a disproportionate demand on government resource, which must be deployed to investigate, litigate and legislate to challenge and change their behavior,” she said.
In the previous parliament, she said, the government invested more than £1 billion in HMRC to strengthen their powers to tackle avoidance and evasion; and made over 40 legislative changes to combat tax avoidance, closing down loopholes and introducing major reforms to the UK tax system.
“In this parliament we have continued to tighten defences against avoidance, most recently bringing in new sanctions for those who engage in multiple avoidance arrangements that fail, additional sanctions for promoters of such arrangements, and a penalty on those who trigger the General Anti-Abuse Rule. We have also consulted on changes to ensure the Disclosure of Tax Avoidance Schemes regime keeps track with emerging risks and behaviours,” she added.
Tax avoidance, Ms Ellison said, takes money away from public services and places disproportionate demands on the government’s resources.
“Those who seek an unfair advantage, or who provide the services that enable it, and who then frustrate HMRC’s efforts to identify, investigate and resolve these cases, should bear real risks and costs for their choices,” she contended.
The consultation document, Ms Ellison said, sets out plans and proposals to bear down on “this shrinking but persistent minority.”