Government plans to introduce tax avoidance scheme penalties for professional advisers have been roundly criticised by lawyers and accountants.
Under the plans set out in a discussion document published this week “enablers” of tax avoidance could have to pay a fine of up to 100% of the tax the scheme’s user underpaid.
Fiona Fernie, partner and head of tax investigations at Pinsent Masons, says the consultation document lays out a definition of tax avoidance, which is far too broad: “Some aspects of these proposals go too far and could end up capturing traditionally accepted tax planning.”
Fernie says. “The wording of the proposals suggests that measures will cover not only all schemes counter-acted by the General Anti-Abuse Rule (GAAR) or notifiable under DOTAS but also those which have simply been the subject of a targeted avoidance-related rule or ‘unallowable purpose test’ contained within a specific piece of legislation. This is incredibly wide-ranging and the criteria need to be tightened.
“Restricting the proposals to all schemes notifiable under DOTAS would be a more sensible approach”
TWP Accounting’s managing partner, audit and corporate finance, Philip Munk, says the government should focus on amending existing legislation, rather than opting for an “arguably easy way out” by introducing penalties for professional tax advisers.
Munk says: “Tax avoidance is legal: tax evasion is not. Tax avoidance will therefore always ensure the correct amount of tax is paid in accordance with prevailing legislation.”
