Tax avoidance: now accountants face tough fines

Helping clients bend the tax rules could soon land tax experts with a fine, the Treasury has warned.

Accountants who help people avoid tax could face much tougher fines under new penalties being proposed by the Treasury.

Fines of up to 100% of the tax that was avoided have been suggested in the new rules that have been published ahead of a consultation.

The penalties would mark a big departure from the current system which sees the tax advisers go virtually unpunished when they help their clients dodge tax bills, whereas the client faces huge fines.

From ISAs to Share dealing: visit the loveMONEY investment centre (capital at risk)

“Making sure they pay”

“People who peddle tax avoidance schemes deny the country of vital tax revenue and this Government is determined to make sure they pay,” says Jane Ellison, the Financial Secretary to the Treasury.

“The vast majority of their schemes don’t work and can land their users in court facing large tax bills and other costs.”

HM Revenues & Customs has targeted the person not paying their tax in the past, but the people advising them and masterminding the tax avoidance schemes have been left alone.

The changes would mean those people pulling the strings would be targeted as well.

“These tough new sanctions will make would-be enablers think twice and in turn reduce the number of schemes on the market,” says Ellison.

Tax abuse costs £3 billion a year

The hope is that the changes would help “root out” tax avoidance at the source, says the Treasury.

It would also become simpler to enforce penalties when avoidance schemes are defeated under the changes.

The new penalties would be aimed at the accountants and tax advisers exploit tax rules and bend them in ways Parliament never intended.

This tax abuse costs HMRC around £3 billion a year.

Visit the loveMONEY investment centre (capital at risk)

What it means for tax experts

The changes will have a significant effect, according to accountants.

The threat of 100% fines will mean advisers simply can’t afford to give advice on tax avoidance.

“Lawyers and accountants will not take the risk of selling these schemes,” Richard Murphy, a chartered accountant and academic at City University, told the BBC.

“There’s a risk of a 100% fine so they’ll think they can’t afford to do it.

“Every honest accountant will be jumping for joy this morning that those who have been selling these schemes will be put out of practice.”