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Aggressive Tax Planning

Tax Planning

A tax planning clampdown on aggressive tax schemes has been announced by Theresa May’s new Government. It is estimated that each year, Billions of pounds of tax revenue that should be paid is lost due to complicated and aggressive tax planning schemes.

The Government has tightened up on tax evasion over the last few years, and a number of “Celebrity Tax evasion” cases have received extensive press coverage.

The Treasury has invested £1 Billion over the last few years addressing tax evasion, however they felt that this needed to go further.

In an announcement yesterday, the Financial Secretary to the Treasury, Jane Ellison, confirmed that:

“People who peddle tax avoidance schemes deny the country vital tax revenue, and this government is determined to make sure they pay. Most of their schemes don’t work and can land their users in court facing large tax bills and other costs. These tough new sanctions will make would-be enablers think twice and, in turn, reduce the number of schemes on the market.”

Making Accountants, Tax Planners and Advisers accountable

Up until now, businesses promoting this advice have not received any recourse or comeback in relation to this type of tax evasion. High fees and commissions were normal in this type of arrangement, with the client bearing the cost. The aim of the consultation is to deter Tax advisers, accountants, and financial advisers from encouraging clients to invest in complicated and risky schemes that are specifically designed to avoid tax.

Part of the plan is to levy penalties on advisers who recommend such schemes. The penalty could be up to 100% of the tax that should have been paid.

The Government has confirmed that most advisers do not recommend these arrangements, but a minority still operate in this area. After the 2015 budget, the Government recommended that the regulatory bodies responsible for tax and accountancy raise standards in this area. Since then, the industry has been working hard to strengthen its professional conduct standards in relation to taxation. In addition, a code of practice on bank taxation was introduced in 2009.

Traditional tax planning still acceptable

The government has confirmed that traditional and proven tax planning methods such as Pensions, Individual savings accounts and trust planning will still be acceptable. This is good news for clients and reassuring, as it gives advisers an outline of the types of planning that is not classed as tax evasion.

Our view and Stance

We have been aware of the HMRC’s concerns over these types of schemes for a number of years. The Revenue’s disclosure of tax avoidance schemes legislation (DOTAS) has highlighted the issue and an impending tax planning clampdown in the area. We have always believed in the long run that ultimately it would be the clients of these schemes that would suffer financial loss and penalties.

As a consequence, we have never recommended these types of arrangements to our clients.

More information

The government has produced a consultation paper on the proposed penalties for accountants and tax advisers. A copy of the paper can be accessed under the www.gov.uk website under strengthens tax avoidance measures.

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