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rotten apples
istock_Radosavljevic

Apple + penalties for accountants = Armageddon

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31st Aug 2016
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I haven’t yet had time to look at either matter in detail but putting two recent news stories together could have terrifying consequences for the profession.

Last week, the Government announced its intention to charge professionals, including accountants, fines of up to 100% of taxes that they help their clients to avoid.

Without reading the small print, this appears to go further than attacking those who assist in the propagation of fraud through tax evasion.

If we become involved in any kind of avoidance technique that goes beyond the basic use of strategies clearly permitted and envisaged by law, the consequences could be expensive.

The second story, which hit the headlines yesterday, related to Apple’s activities (or otherwise) in Ireland.

The European Court in its infinite wisdom decided that alleged sweetheart deals which saved the technology company billions of euros were illegal. The reasoning was that the Irish government provided state aid for the benefit of the multinational, which is against European legislation. This is already proving controversial but the decision might well stick.

It doesn’t take a genius to work out that if Apple’s tax advisers were involved in planning that led to illegal tax avoidance on the part of the corporation then, under the proposed new UK laws, those advisers might be in the frame for penalties of €11 billion, which must surely put even the very biggest firms in the world out of existence with several billion to spare.

Clearly, if one can ignore the pun, this article is adding apples to oranges. Even so, until Britain manages to cross the finishing line and exits the European Union, and quite possibly for a decade or more thereafter while old tax cases go through the courts, clients could be penalised for benefiting from state aid. It therefore follows that accountants could face 100% penalties.

One thought to ponder might be Double Indemnity. While some readers might decide that the Billy Wilder film starring Barbara Stanwyck will offer much-needed escapism in these scary circumstances, more seriously accountants might begin to ask clients to provide indemnity in situations of this type.

However, clients being sold a “scheme” might not be impressed that being told that not only might it not work but the penalty for failure could be not only payment of tax plus a penalty of at say 100% but a further 100% to protect those who promoted it in the first place.

In this light, the powers that be within the profession need to be working hard to ensure that it isn’t closed down as a result of almost every member either being excluded due to bankruptcy or running for the hills.

Replies (2)

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FT
By FirstTab
02nd Sep 2016 13:37

On both points, I am pleased.

The big accountancy firms are getting away with selling tax schemes, resulting in UK Plc losing out. Further, getting in talent to find loopholes in tax legislation to earn a buck. Great for partners, but such a loss to the community.

The talent in these firms will find ways to get around 100% fines. That is how things work with well established accountancy firms. It will always be cat and mouse game.

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FT
By FirstTab
03rd Sep 2016 20:18
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