Mehjoo case: Reactions from the profession

Last week The Times reported that the accountancy profession had been “thrown into turmoil” after a High Court judge appeared to rule that practitioners had a duty to advise wealthy clients to avoid tax.

It didn’t take long for tax commentators and community members to express their views over just how significant the Mehjoo v Harben Barker  ruling is.

Here AccountingWEB has provided a round-up of...

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Comments
bookmarklee's picture

Murphy is over reacting as usual    1 thanks

bookmarklee | | Permalink

As I explain in my article Murphy's demand that honest accountants need new protection is utter rot; the judgement did not make it a legal requirement for accountants to advise on abusive (but legal) tax avoidance schemes.  

My added comments in the discussion thread below my article explain this even more carefully.

For the sake of completeness I have copied this clarification below:

The key issue is that in 2004/05 any reasonably competent accountant would have given a non-dom client the same advice.  The accountants in question failed to do this and, crucially, they failed to refer their client to someone who had the necessary expertise to provide, what was, 'standard' advice at that time.

For most conventional clients the position would have been far less clear cut. The question would always have been - what would a reasonably competent accountant have advised? And was there a generally agreed 'solution' that anyone who really understood the situation would have advised be undertaken?  Very few tax avoidance schemes would satisfy these tests.

In recent years very few reasonably competent accountants would give clients positive advice to get involved in fancy tax avoidance schemes. Thus, as I have long argued, there is no serious prospect of anyone being successfully sued for failing to do this.

And there is definitely no new obligation to do this either.

Mark

Abusive tax avoidance scheme?    1 thanks

Ted Numbers | | Permalink

Tax consequences flow from being non-domiciled. Not recognising that (or that a client might be non domiciled in the first place) is at the heart of this case and it is extremely unhelpful to practitioners for the likes of Mr Murphy to make the comments attributed him just to make a political point.

We all know Richard Murphy ...    3 thanks

vstrad | | Permalink

... has an agenda. This time though, at least one of his proposals is utterly bizarre. He wants a law that states explicitly that one must not abuse the spirit of the law. If Parliament was capable of drafting legislation effectively in the first place there would be no such thing as "the spirit of the law", just "the law".

Dishonest for advising on tax??    1 thanks

David Heaton | | Permalink

Richard Murphy's first conclusion and the assumption underlying it worry me.  What kind of detached-from-reality bubble does he live in, where the first conclusion he draws is that 'honest' accountants need legal protection?  In context, he equates not giving obvious tax-saving advice with 'honesty', so giving obvious tax advice is presumably dishonest?  The law does not tax certain transactions undertaken by non-doms.  In what fantasy world is it dishonest to tell a client that a method of transferring shares permitted by law would attract no tax charge? 

Let's remove the morally repugnant non-dom element.  Looking it another way: a UK-domiciled and resident client owns some fixed return preference shares that don't qualify him for entrepreneurs' relief.  In Richard Murphy's world, it would seem to be dishonest to advise the client to seek to change the share rights so that they qualify as ordinary shares, which could qualify for ER and a 10% CGT rate (assuming all other conditions are met, of course). 

His logic on the GAAR is also wanting.  The GAAR makes it much, much easier and equally reasonable for the adviser, be he or she 'honest' or 'dishonest' (and it doesn't matter whose definition we use, but let's assume we're not talking about evasion),  to say to the client 'I do not know whether this way of doing the transaction will save you tax'.  Indeed, he or she could justifiably take a view that there is no point in advising a client about a possible method of achieving an end because it will not save tax.  It's hardly going to be negligent as long as the thought process has occurred and accords with how a reasonably competent accountant would have assessed the odds of success.

There's no need to add to the comments of others about the non-existent legal duty to abuse the spirit of the law.