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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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??

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.

George Gretton's picture

What the Judge may have done in the Mehjoo Case

George Gretton | | Permalink

What the Judge may have done in the Mehjoo Case

Hello All,

I’m posting this in two places, naturally enough in theory, although the AW Relation Architecture very sillily does not allow for it on a formal basis, so that ONE Comment can easily apply to MORE THAN ONE Thread.

We are in a strictly and totally artificial one-to-one enforced relationship here between Threads and Comments; a Foreign Key Relationship. The relationship should be in an Entity to Entity Relationship Holding Relation (or Subrelation). But I digress…

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BH referred me (via a link; that’ll do nicely) to the Mehjoo case thread. Thank you.

It’s mind-bending and I’ll need to think about it hard, and I’m still not sure of all my facts; was the £850,000 also recovered by Mehjoo?

My faith in the Judges in the Judiciary seems to be taking a hammering; I might skip one of my Actions for Defamation if a Judge can “think” like that, and miss getting the Big Picture.

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But what I’ll offer for consideration is an extract from the Code of Ethics for the British Society for Couple Psychotherapists and Counsellors. It’s worth considering for us Accountants in all sorts of ways.

“4.0 Responsibilities to Safeguard Professional Competence and Wellbeing

Members are expected to maintain the highest standards and quality of professional practice and to safeguard their own mental and physical health.

4.1 They must not practise when their functioning may be impaired by illness, drugs, alcohol or any disabling circumstance.

4.2 They must continue their professional development by participating in supervision and discussion of clinical work, seminars, conferences and other activities geared towards facilitating such development. They must fulfil the Continuing Professional Development requirement of their registering bodies [which are different from a “Society” such as this one].

4.3 They must undergo personal psychotherapy where necessary.

4.4 They must restrict their practice within the limits of their own training and competence, referring on and seeking alternative professional consultation or supervision where necessary.”

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As it happens the BIG ONE that I am interested in the primary psychotherapeutic setting for which this code is written is the last one; it may be that a therapist has fallen into a spectacularly well-known trap (laterally communicated AND subconsciously or unconsciously communicated projective identification) after wilfully and negligently failing to get advice / support /supervision, or even pass the case on to a specialist, when explicitly acknowledging the severity of the situation. The damages involved may be substantial.

But in this case the responsible therapist would have consulted somebody, say, with a very great degree both of formal Psychological Understanding and of Psychotherapeutic skill and experience; a real Expert in his or her field, where I use the word “Expert” in its most positive and unambiguous sense.

This where the contrast is, the rub: this would have involved seeking guidance from a very eminent and ethical member of the therapist’s Profession, rather than from some accountant who is totally bent in Society’s ethical terms, as generally experienced and understood. He’s a scumbag in ordinary people’s eyes, just a white collar criminal helping bent businessmen and others evade their proper responsibilities BOTH under the Law AND within normal ethics.

The mega-gaffe and mangling of language that some Judge or other has fallen for (and these guys have Degrees, so they should know better) is to re-define what is socially unacceptable on the one hand as legally acceptable under contract on the other, and for me that’s a real feck-up.

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I observe separately in respect of 4.2 and 4.3 that it seems that many Sole Practitioner Psychotherapists depart from the straight and narrow in their unsupervised isolation, with nobody to challenge them when they are slipping off into fantasy world, in exactly the same way as I have seen Sole Practitioner Accountants doing and done, of the sort of God’s Gift Accountant that don’t bother to engage, among other possible things, in such groups as these on AW, or in other review-oriented peer-to-peer arrangements. And boy, do they get shirty when exposed, or threatened. I bear the scars.

I notoriously (The Mizzbrazil Accounts; I didn’t split out the £2 of Share Capital from Accumulated losses of £17k odd) could have benefited from somebody reviewing those accounts.

But that Judge seems to have explicitly endorsed practises that are implicitly entirely unacceptable; what a Feck-up, Father Jack; you could have done better!

Yours, George Gretton, Thursday 27th June 2013, 16:44 BST