Yesterday’s article by Rebecca Cave should send a chill down the spines of everybody involved in advising clients on tax planning.
Readers should have known that this was coming but it is still chilling to discover that, as soon as the last day of September, the Criminal Finances Act 2017 takes effect.
On the surface, this may not seem too sinister, since few of us would believe that we either help to facilitate the evasion of UK tax or facilitate non-UK tax evasion.
However, delving not too far beneath the surface, it is easy to see how some of our slightly more careless (or aggressive) brethren could come a cropper. Indeed, some readers might very willingly wager that the profession could have been seriously denuded had this legislation been applied rigorously for the last few decades. Indeed, one might argue that the government may need to consider implementing an even more extensive prison building regime to accommodate all of those who are going to need new homes.
Rebecca helpfully quotes examples presented in brief guidance from the Chartered Institute of Taxation. A few of the choice offences might well sound familiar to us all, whether our experience lies in large practices or small.
I have certainly seen clients who failed to declare items of personal expenditure on P11Ds. This has variously been the result of innocent error, uncertainty about the law or plain and simple tax avoidance.
Similarly, it is not unknown (more provocatively, I might mischievously suggest that this is common practice across much of the profession) for firms to charge token amounts for the completion of directors’ tax returns, while mysteriously finding that the cost of compliance for their employing companies outstrips the hours spent. Sending a bill to the wrong person, for example, a company rather than its director might also have been deemed acceptable practice, which it is as long as the benefit is included on a Form P11D.
Once again, submitting tax returns including claims that cannot be justified might have been regarded as a grey area, since distinguishing this from a situation where the treatment is in doubt is not always easy and could eventually lead to a lot of difficulties for the courts.
I have not personally come across intentional manipulation of documents such as falsifying dates, although clients have asked the question.
Again, perhaps it is the nature of my practice but personal experience does not extend to knowledge that a client has set up structures to hide income, gains or assets from HMRC, let alone helping them to do so. Once again, the word in the profession and the media is that this has been regular practice over the years.
It has to be said that these examples are largely of the milder variety. My guess is that many of those reading this column will be well aware of strategies that have sailed far closer to the wind.
Going forwards everyone involved in advising both corporate and personal clients about their tax affairs, except those working as sole practitioners who are inexplicably excluded from the ambit of the new rules, needs to have a deep understanding of this legislation and its applicability.
Nobody wants to see accountants penalised or, even worse, going to prison for doing their clients a bit of a favour or for that matter trying to boost fees by using questionable planning techniques. However, with unlimited financial penalties, confiscation orders, serious crime prevention orders, regulatory issues and reputational damage not to mention the accompanying criminal conviction, this legislation has very sharp teeth.