The Law Society has slammed HMRC’s consultation into tackling tax avoidance schemes as ‘disproportionate and potentially ineffective’, affecting the work of legitimate tax advisers and introducing onerous levels of compliance and cost.
The consultation, launched in March of this year, aims to tackle the promotion of schemes which actively promote tax avoidance. HMRC estimate they have already closed the gap on marketed tax avoidance from £1.5bn in the financial year 2005/06 to £0.5bn. Commenting on the current methodology of tax avoidance the government said
“The avoidance market is dominated by disguised remuneration schemes. Disguised remuneration schemes claim to avoid Income Tax and National Insurance contributions (NICs) on a worker’s earnings. They normally involve paying earnings in the form of loans or other payments which are claimed to be not taxable.”
“These efforts to game the system generate no additional value for the economy and deprive vital public services of funding. It is crucial that we uphold these principles by closing in on promoters of marketed avoidance and end their activities altogether.”
The consultation, which closed this week, sought views on a range of tools HMRC could use to tackle promoters of tax avoidance. But the Law Society say the wide scope of the consultation, which includes expanding the scope of the Disclosure of Tax Avoidance Schemes (DOTAS) regime, introducing new tools like a Universal Stop Notice (USN) and a Promoter Action Notice (PAN), and implementing stronger information powers, could affect the wider rax advisory market.
“If the scope of these proposals is not narrowed… it will likely deter legitimate advisers from advising or materially increase compliance costs, which can have the knock-on effect of pushing up the cost of obtaining advice.
said Law Society of England and Wales president Richard Atkinson.
“The watering down of the fundamental right clients have to legal professional privilege is a concern. We oppose any steps that would impinge on this right to obtain confidential legal advice. The proposals also risk giving the executive unconstitutionally wide powers to declare certain arrangements or tax planning ‘off limits’ without being approved in primary legislation or determined by a court.
“Promoters of aggressive tax avoidance schemes can cause harm and we are engaging with the government to put measures in place to stop this, without impacting people’s ability to get legitimate tax advice.”
