Tackling aggressive tax avoidance

by Michael Izza on 23.07.2012 13:50

Today’s speech by Treasury Minister David Gauke is the next stage in ratcheting up the pressure on those tax payers and their advisors who engage in aggressive tax avoidance.

As readers of this blog will have seen, this is an issue where as a profession, we don’t necessarily agree on what the boundaries are or indeed where the line should be drawn between legitimate tax planning and aggressive avoidance. Today’s consultation should help to define those boundaries and provide greater certainty, an essential requirement of reasonable and responsible tax planning that our members undertake for their clients.

That’s not to say we will necessarily agree with everything in the consultation. We will be studying the proposals and discussing with members through our Tax Faculty in the coming weeks and months.

For example, it does concern me that ministers, in wanting to single out those advisors actively involved in promoting aggressive tax avoidance schemes, may taint our profession as a whole. From the conversations I’ve had in the last couple of weeks, it is clear that the vast majority of ICAEW member firms don’t want to be involved with such practices. They appreciate how damaging the consequences of such schemes could be to their clients’ reputations and ultimately their own if HMRC take action against a scheme or launch a broader investigation.

I am also concerned at proposals to make finance companies disclose details of wealthy clients who take advantage of such schemes. This needs to be considered in the context of legal professional privilege where we have been, and will continue to argue for a level playing field for lawyers and chartered accountants when it comes to the provision of advice on tax law.

What is clear however is that over recent months, we have seen the tone of the debate on aggressive tax avoidance change. Politicians are reflecting the views of wider society that such behaviour is not only unacceptable but needs to be stopped. As a profession, I believe we have a critical role to play. Our discussions with ministers and HMRC over the last week confirm that they do want to work with us on how this is taken forward. I believe this has to be in the long term interests of our profession and our members - rather than the alternative of having new rules and regulations imposed without any input from us.

A postcript: guidance on tax avoidance from ICAEW.