The CIOT has published a press release which I would encourage all accountants to read. It is titled: CIOT President suggests there may be a need to target promoters of dodgy tax schemes under mis-selling laws.
I welcome this statement as I have had similar thoughts myself. Many tax schemes require clients to make some form of investment. In effect they are making a judgement call (often not based on full information) that the scheme will produce a beter return than a conventional investment.
We know that financial regulations preclude us from recommending specific regulated investments. This is part and parcel of evidencing our independence – hence the further restriction on recommending tied investment advisers. Our professional ethics, which apply to those of us who are members of CCAB professional bodies, require us to disclose to clients all commissions and introductory fees etc that we earn from investment advice or from any other activity.
These same ethical principles also apply when it comes to advising on tax schemes. Commissions etc are disclosable to clients and we have a duty to evidence our independence.
The issue that has started to exercise my mind is why there is no commensurate restriction on our ability to promote unregulated investments – which would include loans, mortgages and funding providers as well as tax schemes.
Patrick Stevens, in his statement yesterday, suggests that
“there may be a need to consider toughening up financial services mis-selling rules to attack the promoters and sellers of tax schemes that have no real prospect of working.”
In my view this is only a step away from requiring accountants and tax advisers to be as cautious when recommending tax schemes as when recommending investments.
What do you think?
Although these tax schemes are often ‘legal’ they are often regarded as somewhat immoral and leave a nasty taste in the mouth. However HMR&C are largely to blame!
If a cooper made a barrel which was full of holes, he would be sacked. So what happens to the people who draw up these tax laws which are full of holes? Loopholes are often found within hours, or even minutes,of the laws being published. Are they just published anyway without consideration?
I have never been involved in ‘aggressive’ tax avoidance schemes and do not really ever want to be. However, I do think that the Government and HMRC are guilty of hypocrisy in this debate.
This lies, I think, in the reliance on what was ‘intended’ by Parliament. This approach appears to condone incompetence in law-making. Is not the clearest evidence of the intention of Parliament the very law it writes? When some years ago the inconsistency in the income tax and CGT codes came to light in Mansworth and Jelley, was it wrong for taxpayers to take advantage of the obvious incompetence of law-makers while they could? I do not think so.
Does the Government expect taxpayers to pay heed to their intention when they demonstrate incompetence in writing coherent law any more than HMRC pays heed, say, to the taxpayer’s ‘intention’ to file their SA return on time or meet deadlines in general when things get stuck in the post, or to fail to make some claim or other in the proper manner, or on the right piece of paper? The authorities operate the law to the letter when it suits them, so why should taxpayers do otherwise?
There are many shades of grey. The fees that the promoters of ‘tax schemes’ charge are a side-issue, but I agree with the notion that that scenario is much like an investment. The real problem I think is in the complexity of tax and public (including MPs’ and journalists’) failure to comprehend it (sometimes wilfully). An example of this was the outrage expressed at MPs claiming one home as their main home for their expenses but NOMINATING another as their principle residence for tax purposes; a conflation of two completely different questions! Were the MPs in question right or wrong to treat the two systems separately or not?
The tax system is too complicated for the public to understand it. It has to be simplified, and constructed with greater care and elegance. And it needs to be operated without hypocrisy.