Accountants and tax advisers who help clients avoid paying tax could face hefty fines under the Government’s latest promised clamp down on tax cheats.
HMRC is issuing a consultation document on Wednesday which proposes that advisers who help their clients try to cheat the tax collectors could be fined up to 100 per cent of the underpaid tax.
Currently, it can be very expensive for the person who owes tax when they are defeated in court by HMRC, but the tax planners who advised them to try an illegal tax avoidance scheme run almost no risk. The Government is now proposing to target them in the hope of rooting out tax avoidance schemes.
Examples of court battles won by HMRC include a scheme under which the transport group, Stagecoach, tried to save itself £11 million in corporation tax in 2010-11 by shifting money between companies to give the impression that they were making a loss. In March a tax tribunal ruled that the scheme was illegal. Stagecoach was advised by KPMG, one of the UK’s big four auditors.
Another more recent court victory for HMRC means that the brewery Greene King will have to pay around £30 million it had avoided under a scheme in which one company in the group claimed tax relief on interest paid to another company without that company paying tax on the income it received. The scheme was devised by EY (Ernst and Young).
The Financial Secretary to the Treasury, Jane Ellison said: “People who peddle tax avoidance schemes deny the country of vital tax revenue and this Government is determined to make sure they pay.
“The vast majority of their schemes don’t work and can land their users in court facing large tax bills and other costs.
“These tough new sanctions will make would-be enablers think twice and in turn reduce the number of schemes on the market.”
The consultation document also clarifies the rules around whether proven tax avoiders have taken reasonable care to ensure their tax returns do not contain inaccuracies, making it simpler to enforce penalties when avoidance schemes are defeated.