Finance Bill 2012: Dishonest agents face £50,000 fines

The Finance Bill 2012 will strengthen HMRC’s powers to collect information and punish tax agents found to have acted dishonestly, including the right to impose a £50,000 civil penalty and publish the details of those who do not make a full disclosure.

Under the new procedure, HMRC would issue a conduct notice to advisers found to have engaged in dishonest conduct. This notice would be subject to appeal.

Subject to prior approval by the first-tier tribunal, HMRC would also be able to issue a File Access Notice requiring dishonest agents to produce their working papers. Agents found to have deliberately concealed or destroyed a material document after getting a conduct notice or access note could find themselves facing not just the £50,000 fine, but up to two years in prison.

The dishonest conduct regime appears to follow the template set out in a revised consultation document published in July, which was redrafted after vociferous responses from outraged practitioners.

HMRC accepted the original wording “deliberate wrongdoing” was too widely drawn and dropped it in favour of “dishonest conduct”. This definition is based on proving that the adviser has done

something to bring about a loss of tax revenue by:

• accounting for less tax than they are legally required to account for
• obtaining more tax relief than they are entitled to obtain
• accounting for tax later than they are required to account for it; or
• obtaining tax relief earlier than they are entitled to obtain it by law.

Specialist teams will be required to police dishonest agents and will have access to updated software tools to automate the process. With computer costs included, this initiative will cost in £2m-£3m a year.

The new procedure will require amendments to sections 20A and 99 of the Taxes Management Act  (TMA)  1970 , but will be enacted by a Treasury Order to take effect from 1 April 2013. The dishonest agent regime will only apply to direct taxes and not VAT.

CIOT president Anthony Thomas commented: “We still question whether the proposed powers are actually needed at all.  We strongly encourage HMRC to tackle wrongdoing, but our view is that the best way to deal with dishonest tax agents is to prosecute them. In this way, the dishonest agent is subject to the criminal law with the appropriate checks and balances that have been put in place over hundreds of years.”

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