Ernst partner quits after Revenue inquiry

The resignation of a prominent tax partner brings to a head a long-running dispute with the Inland Revenue, which has made big raids on the offices of several firms. Roger Trapp reports.

A leading partner in Ernst & Young, one of the Big Six firms of chartered accountants, has resigned following an Inland Revenue investigation into suspected tax fraud.

The firm, which last month announced it was planning a merger with fellow Big Six practice KPMG, said in a statement that Robin John, who worked in the firm's London financial services office, "has decided that it is in his interests and those of the firm" to resign from the partnership while the inquiries continue. He left last Friday, "with immediate effect".

The move follows raids in what has been described as "the most spectacular investigation ever launched" by the Revenue. Five E&Y offices, including its London headquarters, were among 40 premises raided by Revenue officials last month. Mr John's home and the offices of other professional advisers are understood to be among the others.

The Revenue last night refused to comment on the investigation. But, according to the latest issue of Accountancy Age magazine, it is known that the case dates back to 1993, when officials attempted to block a series of avoidance schemes operated by UK companies. The schemes involved selling subsidiaries with large tax liabilities to trusts based in offshore tax havens, such as Guernsey.

Although the Revenue lost a lengthy legal battle with the companies in what E&Y calls "a small number of `money-purchase' schemes", the law was changed in the 1994 Budget and documents were passed to the Revenue's special investigations unit. It is believed that it has examined whether purchasers involved involved in the schemes and their advisers tried to cheat the Revenue.

E&Y has been conducting its own investigation and, although this is not yet completed, it is understood it is not expecting any further departures. The firm added that it is continuing to give its full co-operation to the investigation.

The development comes as a report from the National Audit Office published yesterday indicates a growing tendency for tax authorities in different countries to share information. In particular, note tax practitioners, there is an increasing readiness on the part of authorities to alert their colleagues in other countries rather than wait to be asked specific questions.

One said: "In a sense this kills the idea - if it ever really existed - that one can avoid tax by hiding money or assets abroad."