Advisers face 100% tax penalty for helping avoidance

Advisers face 100% tax penalty for helping avoidance

HMRC has unveiled plans to target advisers who help their clients avoid paying their share of tax.

The taxman said an adviser will be classed as an 'enabler' of tax avoidance if they are “a designer of arrangements, is a manager of arrangements, marketed the arrangements, is an enabling participant in the arrangements, is a financial enabler in relation to the arrangements”.

An adviser found to have been part of any one of the five five categories is liable to the fine of £3,000 or 100 per cent of the tax avoided, whichever is the higher amount.

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The taxman defines a manager of arrangements as: “Organisation and management could involve ensuring the required paperwork is in place to set up and implement the arrangements, or facilitating transactions forming part of the arrangements.”

The rules, contained in HMRC guidance published on 30 April, also made clear who will not be considered aiding tax avoidance.

“Simply performing a statutory function or a service, such as preparing board minutes, completing or filing a return, making filings at Companies House or Land Registry, or auditing statutory accounts, even where these reflect a tax advantage from abusive tax arrangements, will not be managing or organising those arrangements provided that is all that has been done,” the paper said.

An “enabling participant” is defined by HMRC as being someone whose role is sufficiently crucial to the tax avoidance measure that the tax advantage would not have occurred without the input of the adviser.

The rules state that the enabler will be defined as the employer, rather than the individual employee, of the advice firm, as the employee would be deemed to be acting in the interests of the employer.

Paul Stocks, an adviser at Dobson and Hodge in Doncaster, said the rules outlined by HMRC do not clarify whether tax planning instruments such as Isas and self-invested personal pensions are covered by the new rules, but said as an adviser he can only assume that those instruments are not covered.

He added: "We wouldn’t see ourselves as ‘tax advisers’ per se but tax planning is an important part of our advice. 

"We would, therefore, advise on the use of pensions, Isa and bonds based on tax positions of the client.

"We'd also oversee trust and broader estate planning strategies where such objectives exist, and perhaps enterprise investment schemes if appropriate, which is rare. 

"Having said that, we wouldn’t expect to facilitate investments into ‘tax avoidance schemes'".