The government is taking on the firms who promote tax avoidance to wealthy investors with stiffer penalties of up to £1 million and a ‘name and shame’ policy for the architects of failed schemes.
The Treasury has opened consultation on the penalty regime following on from an announcement in Budget 2013 to crack down on tax avoidance.
Besides the punitive penalties, the government also want tax advisers to give more details of how their schemes work in advance.
The consultation paper Tackling the supply of and demand for avoidance schemes, Raising the stakes on tax avoidance follows on from the 2012 Lifting the lid on tax avoidance schemes consultation.
The earlier paper pinpointed the behaviour of accountants and lawyers promoting aggressive tax avoidance schemes as a problem for HMRC and is seeking ideas on how to address the practice.
Tax avoidance is legal
Government rhetoric trying to outlaw tax avoidance is couched in language that highlights ‘lost tax’ and ‘aggressive avoidance’, but the taxpayers right to avoid tax by legal means is enshrined in UK law.
Whatever the moral and ethical stance the government takes, only tax evasion is illegal and to brand all tax management schemes wrong is legally incorrect.
One proposal is to ‘name and shame’ promoters of failed tax management schemes. HM Revenue and Customs has no power to publicise the organisers of such schemes, but their details are available from tax tribunal and court papers, so the step is only slightly broadening of current laws.
The idea is to disassociate wealthy investors from dealing with tax management advisers.
HMRC will also demand tax management advisers to file more details of their schemes before selling them to taxpayers and will fine advisers up to £1 million if they fail to keep to the rules.
Cowboy advisers
Investors in failed schemes will be expected to pay tax penalties and interest on the amount within tight time limits.
Exchequer Secretary to the Treasury, David Gauke said: “The government has said before that we intend to take on those avoiding tax and this consultation takes HMRC a step closer to dealing with cowboy advisers who think up these tax management schemes.
“HMRC wins eight out of 10 tax avoidance cases that end up in court. We want to stop taxpayers resorting to these of unsuccessful tactics and make sure they pay the tax they owe.
“Most advisers do not promote aggressive avoidance, but a minority persist. HMRC will make their lives harder and this consultation shows we are willing and able to take them on.”
The consultation will close on October 4, 2013.
