Top accountancy firms accused of exploiting tax laws they helped to draft

 

Britain’s largest accountancy firms help the Treasury draft financial legislation which they then use to help their clients evade tax, it was revealed today.

Senior employees from companies such as KPMG are seconded to the Treasury to work with civil servants writing complex new tax laws.

But when they return to their firms they then help create the tax schemes which take advantage of the same laws to minimise the bills of their clients.

The practice emerged during evidence to the powerful House of Common’s Public Accounts Committee today by senior executives from Britain’s ‘big four’ accountancy firms.

Margaret Hodge, Chairman of the committee, described the practice as “shocking” telling the executives: “You’re a poacher turned game-keeper, and then you go back and become a poacher again. That is shocking. You’re writing the technical stuff then you use that very stuff you’ve written to go away and advise your clients how to abuse the law, find loopholes in it to avoid tax.”

Ms Hodge said she had seen evidence that a senior accountant from KPMG had been seconded to the Treasury to help draft new laws designed to encourage innovation by giving tax relief on the profits from patents.

But when he returned to KPMG after the law was passed he was named on a sales brochure advising clients how they could use the new law to cut their tax bills.

Ms Hodge described the revolving door between Whitehall and the accountancy firms as an abuse of process which had the potential to deny the exchequer of much needed funds to pay for schools, hospitals and other vital public services.

“What is completely inappropriate and wrong to me is that the guy who helped write the law then goes back and supports clients using that law for a purpose for which it was never intended” she said.

“(The patent law) wasn’t intended to avoid tax it was intended to support innovation.”

However KPMG’s head of tax, Jane McCormick denied any impropriety, saying that her firm and others offered “technical advice” to government that had made the legislation simpler and more robust. “We’re frequently asked to provide technical support,” she said. “I think that is useful.”

During sometimes ill-tempered questioning of the executives from PriceWaterhouseCoopers (PwC), Deloitte, Ernst & Young and KPMG it also emerged that the companies who use their services are able to “write off” their bills against tax – costing the Treasury around £2 billion a year.

It was also alleged that they advised the clients to adopt tax schemes that had only a 25 per cent chance of being judged legal by the courts.

“That means you are offering schemes to your clients where you judge there is a 75 per cent risk of it being deemed unlawful,” said Ms Hodge. “That is shocking.”

However Kevin Nicholson, head of tax at PWC, said he did not recognise the figure.

Labour committee member Austin Mitchell said the “Big Four” were engaged in a game with the taxman which was skewed heavily in their favour.

“There are 9,000 people in the four firms dealing with tax advice or tax avoidance or whatever it turns out to be, as against less than 100 in HMRC dealing with those areas,” said Mr Mitchell.

“This a game in which you are battling a slower-moving HMRC with fewer staff and possibly smaller brain-power - certainly you are better paid than they are. It's a game you must win. It is an illegitimate game to outwit the taxpayer.”

MPs also expressed concern that the “firepower” of the accountancy firms was helping big multinational firms like Amazon gain a competitive advantage over small high street retailers.

“One of the most egregious issues about Amazon is that their lorries are trundling around the UK delivering books to people while not paying any tax,” said the Conservative MP Stewart Jackson. “(Meanwhile) small firms – who do pay tax are going out of business.”

PROMOTED VIDEO
Have you tried new the Independent Digital Edition apps?
News
ebookA unique anthology of reporting and analysis of a crucial period of history
Life and Style
fashionHealth concerns and 'pornified' perceptions have made women more conscious at the beach
Arts and Entertainment
tv
Sport
Ojo Onaolapo celebrates winning the bronze medal
commonwealth games
Arts and Entertainment
Rock band Led Zeppelin in the early 1970s
musicLed Zeppelin to release alternative Stairway To Heaven after 43 years
Arts and Entertainment
High-flyer: Chris Pratt in 'Guardians of the Galaxy'
filmHe was homeless in Hawaii when he got his big break. Now the comic actor Chris Pratt is Hollywood's new favourite action star
Sport
Van Gaal said that his challenge in taking over Bobby Robson's Barcelona team in 1993 has been easier than the task of resurrecting the current United side
footballA colourful discussion on tactics, the merits of the English footballer and rebuilding Manchester United
Life and Style
Sainsbury's could roll the lorries out across its whole fleet if they are successful
tech
Travel
The shipping news: a typical Snoozebox construction
travelSpending the night in a shipping container doesn't sound appealing, but mobile crash pads are popping up at the summer's biggest events
Arts and Entertainment
'Old Fashioned' will be a different kind of love story to '50 Shades'
film
Arts and Entertainment
Tracey Emin's 'My Bed' is returning to the Tate more than 15 years after it first caused shockwaves at the gallery
artTracey Emin's bed returns to the Tate after record sale
Arts and Entertainment
Smart mover: Peter Bazalgette
filmHow live cinema screenings can boost arts audiences
Environment
Neil Young performing at Hyde Park, London, earlier this month
environment
Independent
Travel Shop
the manor
Up to 70% off luxury travel
on city breaks Find out more
santorini
Up to 70% off luxury travel
on chic beach resorts Find out more
sardina foodie
Up to 70% off luxury travel
on country retreats Find out more
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs General

Project Coordinator

Competitive: The Green Recruitment Company: The Organisation: The Green Recrui...

Project Manager (HR)- Bristol - Upto £400 p/day

£350 - £400 per annum + competitive: Orgtel: Project Manager (specializing in ...

Embedded Linux Engineer

£40000 - £50000 per annum + competitive: Progressive Recruitment: Embedded Sof...

Senior Hardware Design Engineer - Broadcast

£50000 - £65000 per annum + Benefits: Progressive Recruitment: Working for a m...

Day In a Page

Save the tiger: The animals bred for bones on China’s tiger farms

The animals bred for bones on China’s tiger farms

The big cats kept in captivity to perform for paying audiences and then, when dead, their bodies used to fortify wine
A former custard factory, a Midlands bog and a Leeds cemetery all included in top 50 hidden spots in the UK

A former custard factory, a Midlands bog and a Leeds cemetery

Introducing the top 50 hidden spots in Britain
Ebola epidemic: Plagued by fear

Ebola epidemic: Plagued by fear

How a disease that has claimed fewer than 2,000 victims in its history has earned a place in the darkest corner of the public's imagination
Chris Pratt: From 'Parks and Recreation' to 'Guardians of the Galaxy'

From 'Parks and Recreation' to 'Guardians of the Galaxy'

He was homeless in Hawaii when he got his big break. Now the comic actor Chris Pratt is Hollywood's new favourite action star
How live cinema screenings can boost arts audiences

How live cinema screenings can boost arts audiences

Broadcasting plays and exhibitions to cinemas is a sure-fire box office smash
Shipping container hotels: Pop-up hotels filling a niche

Pop-up hotels filling a niche

Spending the night in a shipping container doesn't sound appealing, but these mobile crash pads are popping up at the summer's biggest events
Native American headdresses are not fashion accessories

Feather dust-up

A Canadian festival has banned Native American headwear. Haven't we been here before?
Boris Johnson's war on diesel

Boris Johnson's war on diesel

11m cars here run on diesel. It's seen as a greener alternative to unleaded petrol. So why is London's mayor on a crusade against the black pump?
5 best waterproof cameras

Splash and flash: 5 best waterproof cameras

Don't let water stop you taking snaps with one of these machines that will take you from the sand to meters deep
Louis van Gaal interview: Manchester United manager discusses tactics and rebuilding after the David Moyes era

Louis van Gaal interview

Manchester United manager discusses tactics and rebuilding after the David Moyes era
Will Gore: The goodwill shown by fans towards Alastair Cook will evaporate rapidly if India win the series

Will Gore: Outside Edge

The goodwill shown by fans towards Alastair Cook will evaporate rapidly if India win the series
The children were playing in the street with toy guns. The air strikes were tragically real

The air strikes were tragically real

The children were playing in the street with toy guns
Boozy, ignorant, intolerant, but very polite – The British, as others see us

Britain as others see us

Boozy, ignorant, intolerant, but very polite
How did our legends really begin?

How did our legends really begin?

Applying the theory of evolution to the world's many mythologies
Watch out: Lambrusco is back on the menu

Lambrusco is back on the menu

Naff Seventies corner-shop staple is this year's Aperol Spritz