A committee of MPs has been warned of concerns that HM Revenue & Customs’ net for catching advisers promoting tax avoidance has been cast too widely.
Last month, HMRC published proposals which could mean advisers have to pay a penalty of up to 100 per cent of the tax owed if they are proven in court to be involved in a tax avoidance arrangement.
Addressing the Treasury Select Committee (TSC) on 6 September, Bill Dodwell, head of tax policy at Deloitte and president of the Chartered Institute of Taxation, said legitimate firms could be put out of business by this move.
He added: “If changes are not made, we are worried about whether all the advisers in the country who try and give honest advice on the law would be able to continue in practice given the scale of potential penalties if they were to get it wrong.
In response, Labour MP Helen Goodman said the firms which might go out of business might be promoting tax avoidance, so she “would like them to go out of business”.
The committee was also told that HMRC should learn from the roll-out of auto-enrolment in its bid to make the tax system digital.
HMRC has said it wants to move to a digital tax system for businesses and individual taxpayers by 2020.
Last month, it published a consultation on some of its proposals, which include allowing landlords and sole traders to use a voluntary pay-as-you-go tax system from April 2018.
Landlords or unincorporated businesses, such as sole traders, partnerships and associations that earn more than £10,000 a year, will face new digital record keeping and quarterly return rules.
The panel of experts and small business owners before the TSC expressed concerns about the impact these requirements could have.
Toby Parkins, founder and director of Headforwards and UKNetWeb, said HMRC should learn from the roll-out of auto-enrolment.
He suggested starting with the larger businesses and moving onto smaller and smaller businesses.
Mr Parkins said: “The challenges that the pension providers have been overcoming over the past five years – that experience is being used to provide an easier solution for smaller businesses.”