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HMRC’s plans to strengthen tax avoidance sanctions

Who could be against HMRC taking stronger action to prevent tax avoidance? Not us!

In the Chancellor’s budget statement this spring, one of the measures announced plans to ensure that advisors and service firms facilitating tax avoidance systems should be held liable and accountable for supporting such activities.

We wholly support this approach. Of course, the individual seeking to avoid their tax liabilities bears most responsibility. But often their avoidance activities are only possible with the advice, support, and provision of schemes sold by others in the full knowledge they are used to avoid tax. Previously this was essentially a low-risk activity for such operators as it was their clients who bore the brunt of being investigated by HMRC.

HMRC is running a consultation on how these new measures will operate in practice. We’ve responded in support of the proposals, but highlighted some areas where care is needed to ensure no firm is held liable for genuinely unintentional involvement in an avoidance scheme.

For example, imagine a formation company creates a legally proper new limited company which, without their knowledge, is then used as part of a tax avoidance scheme. In our view, the formation company shouldn’t be held liable for facilitating avoidance. However, if they were to promote and sell a service to form companies in a way specifically aimed at facilitating tax avoidance, then in our view liability should be borne.

So there is some detail to be worked through before the proposals become law. But we absolutely support the principle of advisors being liable for facilitating intentional tax avoidance. We welcome these moves from HMRC and will keep you updated on how the plans progress.

You can read our Consultation Response here.

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