Large fines for English firms giving advice on aggressive tax avoidance

Accountants, lawyers and consultants in England whose multibillion pound industry provides advice on how to aggressively avoid tax could face large financial penalties under government proposals.

Plans set out in a consultation document released on Wednesday suggest that tax advisers whose schemes are defeated in the courts might pay a fine of up to 100% of the money lost to the taxpayer.

It follows British prime minister Theresa May’s pledge last month to clamp down on corporate tax avoidance – widely seen as part of an appeal to working-class Britons struggling with their finances.

Firms including PriceWaterhouseCoopers, KPMG, Deloitte and Ernst & Young and a select band of tax lawyers have previously been accused by MPs on the public accounts committee (PAC) of helping major corporate clients to minimise tax by exploiting complex schemes.

Thousands of wealthy individuals, meanwhile, were revealed to have avoided tax on their Swiss bank accounts through offshore companies marketed by HSBC and other European lenders.

Currently tax avoiders face significant financial costs when HM Revenue & Customs (HMRC) defeats them in court but those who advised on, or facilitated, the avoidance bear little risk.

The consultation document is expected to clarify 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.

Jane Ellison, the financial secretary to the Treasury, will on Wednesday open a 12-week consultation over new proposals of governance which will be outlined to the industry.

“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,” she said in a statement.

Whitehall sources said that the proposals could allow HMRC officials to stop profiteering around aggressive avoidance schemes which have been defeated in the courts.

Earlier this month, HMRC successfully defeated a scheme used by the brewery giant Greene King called Project Sussex, which had been marketed by Ernst & Young. A complex tax avoidance scheme being used by transport group Stagecoach to wipe £11m off its tax bill was defeated in the tax courts in March.

Advisers will want to examine how the government hopes to define when planning becomes tax avoidance and whether they will face fines even if they have made clients aware of any possible risks.

John Cullinane, CIOT’s tax policy director, said: “The government need to be careful that in their efforts to wipe out avoidance schemes they don’t prevent taxpayers from getting access to honest, impartial advice on the law. Definitions will be crucial.”