Access to counsel’s advice should not be jeopardised in tax penalties regime, says Faculty

20 Oct


Counsel and others who merely give advice on tax avoidance schemes without helping to design them should be excluded from a proposed new regime of sanctions, the Faculty has suggested.

In a submission to HM Revenue and Customs, the Faculty said it was unclear if advisers were intended to be liable to penalties under the plans outlined in a discussion paper.

However, the Faculty’s position was unequivocal.

“Counsel, and any tax adviser not responsible to a significant degree for the design of a scheme or arrangements, should be excluded from the scope of the proposed penalties,” it stated.

HMRC says in Strengthening Tax Avoidance Sanctions and Deterrents: A discussion paper that the vast majority of taxpayers in the UK comply with their tax obligations, but a minority try to pay less than their fair share by using tax avoidance arrangements.

The Faculty said it was important that taxpayers had access to professional advice regarding potential tax avoidance issues.

“The Consultation document assumes that advisers generally give favourable advice on the prospects of a scheme and such advice encourages taxpayers to engage in unacceptable tax avoidance. This assumption is not correct, at least not in the case of counsel,” the response stated.

“For example, counsel instructed to advise on a proposed structure may opine favourably; or may give the view that the structure does not work; or that it has a less than 50 per cent chance of success.

“It is generally important that taxpayers have access to counsel’s advice, whatever it may turn out to be, in particular because it is given independently of promoters and others. The proposed penalties could (if and to the extent that they extend beyond advisers who contribute to the design of the schemes) have the effect of precluding counsel from giving such advice.

“This would deprive taxpayers of access to independent advice, including advice that would tend to deter them from proceeding with a proposed arrangement.

“Accordingly, it is submitted that counsel generally, and any other tax advisers who are not responsible for designing a scheme or arrangement, but who merely comment on its effect, should not be within the scope of the penalty regime at all.”