Tax Writer Taxwriter Ltd
Columnist
Share this content
Tags:

Tax profession just doesn’t get it

1st Jun 2015

It took a top flight lawyer to tell the tax profession what they didn’t want to hear: That they are out of touch with the zeitgeist on matters of tax avoidance.

Des Hudson, former Chief Executive of the Law Society and current chairman of the Taxation Disciplinary Board was addressing the great and the good of the tax profession at the CTA Address. His core argument was: There is a disconnect between the tax profession and what society demands on tax behaviour. To bridge this gap the tax profession must reconnect with society as a whole. 

A member of the audience said the standard of behaviour tax advisers should adhere to is to advise clients to pay all the tax the law requires – not a penny more – and that clients should be assisted to pay as little tax as possible. Des Hudson said this was exactly his point: such behaviour is no longer socially acceptable.

If organisations and individuals are seen to be avoiding tax, even through legal means, that is wrong.  He went on to say that society’s expectations of the tax professional now goes beyond telling clients what the law allows, and arguing if you don’t like what the law allows then change the law. That position is no longer seen as persuasive, and the tax profession will fail when using that argument.

Tina Riches of Smith & Williamson made the point that current world of tax advice is completely different to that perceived by the public, as the tax cases going through the courts now are a result of what happened ten years ago.

Several members of the audience also emphasised that a big stumbling block to reforming the behaviour of certain tax practitioners is that the “tax profession” is not regulated; anyone is free to call themselves a tax adviser and is accepted by HMRC to provide tax services.

If Government wants to alter the way the professional bodies act they should consider whether tax should become a protected profession, with statutory rules on who can provide tax services. Des Hudson accepted that restricting who can provide tax services, such that those practitioners are subject to the professional bodies’ ethical code and rule book, is in the public interest.

Another view from the floor was that the profession should fight back and argue against the positions put forward by some of the so-called representatives of “civil society”, that the UK would be in a horrible position if tax legislation was applied in the way those representatives want. Des Hudson said it was too soon to do this, as informed public opinion is currently against tax avoidance.                                                

What do you think?  Should we be concerned with the opinions of the vocal section of society who hate the bankers, as they have a nil understand of the difference between tax planning v. tax avoidance v. tax evasion?

Rebecca Cave is the author of Tax Rates and Tables 2015/16 (Pre-Election edition)  published by Bloomsbury Professional.

Tags:

You might also be interested in

Replies (95)

Please login or register to join the discussion.

avatar
By Tickers
01st Jun 2015 14:15

Socially acceptable
Good to know this top flight lawyer is keeping an eye on what's socially acceptable

Thanks (13)
avatar
By BKD
01st Jun 2015 14:16

Just what is meant by "socially unacceptable"?

I'd bet that every single person that moans about chief execs and multinationals legally reducing their tax bills would jump at the chance to pay less tax themselves.

Therein lies the problem - the typical Daily Mail reader having not a clue about what constitutes legitimate tax mitigation and those that are simply trying it on. I fear that it is a gap that is unlikely ever to be bridged.

Thanks (10)
avatar
By BananaMan
03rd Jun 2015 14:07

"that the law requires"

taxwriter wrote:

tax advisers should adhere to is to advise clients to pay all the tax the law requires

 

Surely this is where the grey area lies - the laws need 'updating'

I am sure some of the schemes were "aggresive" - however, I would argue that there are just as many Legal 'advisors' at fault...

Thanks (0)
avatar
By justsotax
01st Jun 2015 14:21

a bit rich coming from

a lawyer - and as for regulating the profession...are these one of the same profession where QC's give their 'view' (are they part of the 'tax' profession) to back schemes. 

Thanks (7)
avatar
By NotYetanAccountant
01st Jun 2015 15:17

Emotional, not rational

The problem with those who hate on bankers and cry foul of tax evasion whilst mistaking tax avoidance as evasion, is that their argument is purely emotional. The issue here is when people are taking up positions and declaring what is in society's interest.

It is all well for Hudson to declare tax to be paid by the book, because it is 'in the national interest' (Another stumped up emotional argument'. However, the legislative system doesn't help with tax compliance. Especially when our tax system is a very, very complicated mess and full of loopholes.

Rather than calling for regulation of the tax profession and declaring this in the national interest, let's sit down and discuss tax reform. Simplify it, then make sure it is rigorously followed. There should not be any excuses as to why companies are avoiding tax. More so, it'd make the accounting profession much more simple; potentially making it more productive. 

Thanks (6)
avatar
By TaxTeddy
01st Jun 2015 15:24

When my fees are paid ....

... by society at large, I will bow to the will of what is socially acceptable.

While my fees are paid by the client I will fight for his right to pay the legal minimum amount of tax.

The Duke of Westminster ruling lives on!

Thanks (20)
By ireallyshouldknowthisbut
01st Jun 2015 16:04

.

Well quite Tax Teddy.

How are we supposed to make subjective judgements of what is "good tax planning" and what is "bad avoidance?"

Very much in the eye of the beholder.

 

 

Thanks (3)
avatar
By Duhamel
01st Jun 2015 16:48

Comments by a few AWeb members..
...have made me realise how confusing the public must find it. If unscrupulous advisers describe their services as 'tax planning' when they actually mean aggressive avoidance, it's very difficult to distinguish legitimate advisers from cowboys.

Thanks (2)
Teignmouth
By Paul Scholes
01st Jun 2015 17:10

Emotional, Ethical, Rational & Smelly....Humans

I agree with NotYetanAccountant, that we are in need or tax reform and simplification, but that is  a long-term housekeeping issue that goes against our system of short-term, combative,  government and so unless we get a series of knee jerk legislation to sort out obvious ills and inequality within the tax system, major reform is unlikely to happen.

I have never been comfortable being associated with a profession that is viewed as having, as a  prime raison d'etre, the avoidance of tax.  I'm sure we all exist within a spectrum on this issue but I have always taken the view that my job is to let the client know the alternative courses of action and leave them to make a decision over which route to take.  Hand in hand with this though is my own personal ethics over what sort of society I want to inhabit and so I have lost clients, or not taken clients on, where I'm not comfortable assisting with the route they chose.

Some say that this stance comes with age and experience but I felt like this the moment I started training in the industry and was shown how grey transactions could be interpreted, or blind eyes turned, in order to avoid a tax problem.

We may regard ourselves as being part of a civilised society but I think it's at least 100 years off, still maybe this marks one first small clumsy step?

 

Thanks (5)
Stepurhan
By stepurhan
01st Jun 2015 17:18

Provocative headline

Same goes for the opening paragraph. There is an implicit assumption that the tax profession as a whole is wrong and this one tax lawyer is right. Rather an arrogant stance to take.

The reality is that, if we don't want to hear it, it is because "society" has a distorted idea about what we do, not that we are avoiding the "truth". For the speaker to describe public opinion in this area as "informed" is laughable. Avoidance and evasion has been so heavily mixed in recent years that the public can no longer tell them apart. Such commonplace things as use of house and wife's wages could be considered avoidance. In fact they are a reflection of the economic reality of the business having use of valuable office space and admin support.

Thanks (10)
By ShirleyM
01st Jun 2015 18:14

... and again ....

"If organisations and individuals are seen to be avoiding tax, even through legal means, that is wrong. "

The few 'bad apples' in the profession get the lot of us dumped in the same barrel.

If 'tax advisers', tax barristers, and the like didn't flog tax evasion as legal 'tax planning/avoidance' then the difference between avoidance and evasion would be much clearer.

"Several members of the audience also emphasised that a big stumbling block to reforming the behaviour of certain tax practitioners is that the “tax profession” is not regulated; anyone is free to call themselves a tax adviser and is accepted by HMRC to provide tax services."

I like the way some of them blame it on lack of 'regulation' of tax advisers. So none of the promoters and introducers are ACA, CTA, etc??? Do none of the Big Four flog abusive schemes???

The flogging of illegal and abusive schemes will result in a LOT of regulation but hopefully it will be restricted to the promoters and introducers, but I fear it will affect all of us.

Thanks (3)
avatar
By GW
01st Jun 2015 18:40

World turned upside down!

Here we have a lawyer telling us we should be advising clients to pay the socially acceptable amount of tax - whatever that is, rather than the amount the law says is due.

I've always viewed the tax side of the job to be to guide clients through the minefield that is the tax system.

How much of the current mess is due to successive governments tinkering with the system adding complexity on top of complexity. The only way positive way forward I can see is to simplify the whole system, although the politicians preference appears to be lets add more complexity.

How is regulating tax professionals supposed to stop the problem given the news about the big 4 and tax schemes?

How as a profession do we counter the views that avoidance and evasion are the same thing and I am right to use the rules to reduce my tax bill, but if you use the same rules you are wrong? Think back to MP's and PPR elections telling us that it is immoral to donate all your income to charity as it avoids tax, I do not know how to respond to that mindset.

Thanks (3)
avatar
By Jekyll and Hyde
01st Jun 2015 21:01

I am against aggressive tax avoidance, however...

..... Isn't the issue also with the legal profession? In that doesn't the tax profession seek opinion from the legal profession (is a barrister) before the avoidance scheme is marketed. Therefore should the former head of the law society not look at improving their own profession first before critising another profession.

As for society, are we not also against the ambulance chasing solitors that seem to place no win no fee on anything?

Thanks (1)
avatar
By Ken Howard
02nd Jun 2015 08:18

So there are no lawyers who use loopholes?

I must be mistaken because I'm sure I've seen aggressive lawyers using every trick in the book and every loophole to get their clients off traffic fines and other lawyers using obscure and irrelevant breaches in procedure to keep their criminal clients out of prison.  And that's from a highly regulated profession!

Thanks (7)
avatar
By Duhamel
02nd Jun 2015 09:10

Jolyon Maugham
The lawyer in question is almost certainly Jolyon Maugham. You can read some of his work here:

http://waitingfortax.com/2014/08/07/weak-transmission-mechanisms-and-boy...

Where he attacks fellow lawyers using loopholes as some commenters above describe.

I think the point is that the tax profession hasn't got someone with as high profile making the same argument.

Thanks (1)
avatar
By redboam
02nd Jun 2015 10:16

Guilty of What?

Since when has a lack of "socially acceptable" conduct given cause for penalty under the law? If a government does not like the manner in which tax liabilities are being lawfully mitigated then change the law.

Thanks (2)
avatar
By Roland D
02nd Jun 2015 10:21

.

As has already been said, the matter has been allowed to become one of emotion.  However advisers have to deal with the letter of the law, not emotion, because law based on emotion is bad law and inconsistent.  If the letter of the law is giving bad results it is up to the law-makers to change them for the better.

When did it become fact that the Government will spend my money in a more beneficial way to society than I can spend it?  This is the false premise from which many arguments are made and it has to be said that many outlets who should know better, such as the BBC, frequently try to blur the difference between tax avoidance and tax evasion.

Thanks (2)
Avatar
By I'msorryIhaven'taclue
02nd Jun 2015 10:38

For The Good of The Country?

My Dad, a relatively informed member of the public, says he hasn't heard such nationalistic argument and rabble-rousing opinion since WW2, when the iron railings outside his house were taken away "to build tanks" and he himself was placed in a Lanc bomber and pointed at German civilians.

Dad's 91, and wants to know what might happen if an accountant's advice (or lack of advice) leaves his client paying more than the legal minimum of tax - would the client have any potential claim for damages? I guess Mr Hudson is ideally placed to field that question.

 

Thanks (4)
avatar
By Nick_ Robinson
02nd Jun 2015 10:49

Part of the public perception is that tax avoidance schemes are often only available to multi national companies and the ultra wealthy because they involve exporting profits/income to low tax regimes abroad.   Not many Joe Public punters have the option to shift their income to the Caymen Isles!

To say there is no public mood against tax avoidance would be an understatement but it is equally crass to put tax advisors in the position of being expected to deliver moral judgements in addition to advice on tax legislation.  

The reality is that tax avoidance is a multi national game in which governments are only local players.  Unless and until a substantial proportion of the major trading countries develop a unified stance against profit/income export, public and government opinion is whistling in the wind.

Thanks (3)
avatar
By Harrison88
02nd Jun 2015 10:59

Minimum amount of tax

I am a firm believer that a man should be allowed to minimise his tax position. However, this should be universally applied across all members of society. The average Joe can't use a limited company to claim back fuel for his journey. Most aren't aware of things like an allowance for uniforms, etc or simple tax planning choices they can make. That isn't fair.

I would much rather have a simplifed tax system. If someone is earning £150k they should certainly be paying at least the same effective rate as someone earning £25k once personal allowance is removed. Sometimes this isn't the case with routing through companies, partnerships, etc. The debate between a flat rate and a stepped rate is a different conversation.

I certainly don't support this notion of paying more than you're legally required to. If you want to do that I know a fair number of charities that would appreciate the extra funding.

Thanks (2)
jlsmith
By jlsmith
02nd Jun 2015 12:22

"A member of the audience

"A member of the audience said the standard of behaviour tax advisers should adhere to is to advise clients to pay all the tax the law requires – not a penny more – and that clients should be assisted to pay as little tax as possible. Des Hudson said this was exactly his point: such behaviour is no longer socially acceptable."

Thankfully there was someone in the audience brave enough to challenge this sort of nonsense.

We pay taxes required by law and nothing more.  Unless Des Hudson has opened a voluntary donation account with HMRC, so does he.  

Thanks (1)
avatar
By jonnieboy
02nd Jun 2015 12:52

You can't legislate morality

Thanks (1)
avatar
By andrew.hyde
03rd Jun 2015 11:24

Morality again

jonnieboy wrote:

You can't legislate morality

Actually you can't legislate without morality.  Anything else is despotism.

All that law does is express the will of a democratic Parliament.  Some laws express it better than others.  The ones that aren't very good have loopholes. When you use a loophole you knowingly do something that goes against the will of Parliament.  That's what people see as unacceptable, and I agree with them.

(Yes you can discuss whether Parliament is really democratic, but it's a different argument)

Thanks (1)
jlsmith
By jlsmith
03rd Jun 2015 11:50

Subject field is required

@andrew.hyde

andrew.hyde wrote:

When you use a loophole you knowingly do something that goes against the will of Parliament.  That's what people see as unacceptable, and I agree with them.

How can you possibly know what the will of Parliament is, if it is not expressed properly in legislation?  If they create a 'loophole' they should close it in the proper way, through legislation.

 

Thanks (1)
By ShirleyM
02nd Jun 2015 12:56

Making the law tighter won't solve the problem

While ever there are people prepared to 'interpret' the law differently.

I quoted an example above, eg. the Working Wheels Scheme. It is quite legitimate to claim sideways loss relief. It is not legitimate to claim sideways loss relief on a loss that wasn't a real loss and wasn't even a genuine business.

The law is not at fault. The fault lies wholly with the people who choose to deliberately generate costs/expenses/losses ie. artificial transactions, to make use of those laws that are intended to help genuine claimants.

Thanks (3)
PJ
By paulgrca.net
02nd Jun 2015 13:03

One man's opinion

who is clearly out of touch with what the vast majority of us in general practice do on a day to day basis. Strange but I have yet to meet anybody who has refused advise that reduces there tax liability (I'm not talking about anything aggressive just the standard type of advice that we all give from time to time).

 

Thanks (0)
avatar
By johnjenkins
02nd Jun 2015 16:45

The Status Quo

has moved. Years ago Joe public and small business wouldn't mind the "big boys" getting away with a bit, as long as they were getting some benefits. Now the small concern is being bashed about (employment status etc.) so it's time the "big boys" were taught a lesson. Of course the only loser is HMRC and they wonder why there is no money in the coffers. It's not only Balls's fault.

The answer is leave business well alone, have a flat rate of tax for all and do what HMRC should be doing :- making sure that income and expenses are declared properly.

Thanks (2)
avatar
By JC
02nd Jun 2015 17:12

Personal service companies …

Why is anyone employed in the public sector allowed to operate under a personal service company?

Thanks (4)
avatar
By IANTO
03rd Jun 2015 13:40

Personal Service Company

There is no such organisation in law. There are only PLC's and LTD's.

Thanks (0)
avatar
By johnjenkins
02nd Jun 2015 18:01

@JC

Because there is no law that defines employment status. So anyone can trade how they like and that's how it should be. It's commercial not tax. The quicker HMRC get their noses out the better it will be for all.

Thanks (2)
avatar
By The Innkeeper
02nd Jun 2015 20:41

@jv
So the ' employer' avoids NI contributions

Thanks (1)
avatar
By JC
03rd Jun 2015 07:11

Employer dictates terms of employment …

@johnjenkins – ‘.. So anyone can trade how they like and that's how it should be ..’

Maybe missing something, but surely the employer defines the terms of one employment

Seem to recall that when employed by 2 of the big 4, the terms were along the lines of ‘not doing private jobs outside work & with software and systems produced in one’s own time (weekends) the IP and resulting system belonged to the employer’

In the case of the public sector, broadly speaking the state is the employer in one form or another – so why do the terms not prohibit anything other than ‘proper’ employment?

Thanks (1)
avatar
By johnjenkins
03rd Jun 2015 08:53

@JC

If the employer demands too much then they won't get anybody to work for them. The point is that however you trade is up to you and the work giver, not HMRC. The only reason HMRC are sticking their noses in is good old GB wanted more money to cover his incompetence and GO hasn't got the guts to reverse that trend. Some work givers will only take on "proper employment" workers. Some will only take on "subbies". The Government actually realise this but won't do anything about it so they just let HMRC "carry on regardless".

@The Innkeeper. As there is no statutory definition of employment status how can any work giver avoid NI contributions?

Thanks (1)
avatar
By Tickers
03rd Jun 2015 09:06

Hunters into gamekeepers???
Surely it's the role of HMRC/Government rather than the profession to legislate change?

Thanks (1)
jlsmith
By jlsmith
03rd Jun 2015 11:45

@Tickers

 

It is the role of the Government to legislate change.  It is the role of HMRC to operate to its remit within the constraints of that legislation.  It is the role of the profession to attempt prevent both of those parties from doing anything stupid.

Thanks (1)
avatar
By nogammonsinanundoubledgame
03rd Jun 2015 09:20

The issue is not helped by a low level of trust in HMRC

The public face of HMRC has always been to assess and collect "the right amount of tax".  "Right" being (supposedly) defined by the politicos.

However you define "right amount", the practical reality is that HMRC will generally seek to maximise the amount assessed and collected, without regard to that balance, and this is expected of them by the public and by the tax profession alike.

By the same token, HMRC EXPECT the tax profession to argue a contrary position. Often by a process of negotiation or mediation, some compromise solution is reached that is not a million miles adrift of what is "right". An expensive process, but no-one has come up with anything better.

If you remove from the tax profession its objective to hold HMRC to account, the mean drift of tax settlements will inevitably shift in favour of the "wrong" amount of tax (and wrong in an excessive sense).

With kind regards

Clint Westwood

 

Thanks (1)
avatar
By johnjenkins
03rd Jun 2015 09:47

@Tickers

It then follows that as there is no change HMRC do not have the right to challenge employment status.

I don't think tax professionals are out of touch with tax avoidance. When you get crap coming out of HMRC about working under a Limited Company is avoiding NI payments then it's quite obvious that HMRC are out of touch. Society demands the "Status Quo" 

Thanks (0)
avatar
By listerramjet
03rd Jun 2015 11:29

simples

but the point is simple - its a very very small minority of loudmouth rentagobs.  Why should we even listen to them, much less base public policy on the drivel they utter?

Thanks (1)
avatar
By Ben Alligin
03rd Jun 2015 11:31

They protest their innocence too strongly..

So we have the ex head of the Law Society telling us where we are all going wrong. This from an organisation that leaves a lot to be desired, and as for morality don't get me started.

One small correction is that the Law Society regulates solicitors, it does not regulate Barristers, that is the remit of The Bar Council, so a QC would not be regulated by the Law Society.

Why don't we ask Saint Margaret Hodges what her views are on this issue? I am sure she has plenty, although she can't quite recall how minor her share holding were in her father/brother Stemcor company, nor why its overall tax rate was so low.

The sheer hypocrisy of these people is simply staggering.

Thanks (4)
avatar
By moneymanager
03rd Jun 2015 11:41

What's the point?

So, the legal profession believes that tax should be paid other than in full accordance with the  law but only with some arbitrary reading of same. In that case, what's the point of the law?

Thanks (0)
avatar
By booksy
03rd Jun 2015 11:43

Anyone can become a tax advisor?!

As usual everyone pretending that existing rules, regulations, ethics, guidance exist on some other planet presumably the one they lived on when they qualified.

Thanks (0)
avatar
By johnjenkins
03rd Jun 2015 11:45

What were those

words JUDGE Dread spoke :- "I am the law".

Thanks (0)
avatar
By Old Greying Accountant
11th Jun 2015 12:09

Depends ...

johnjenkins wrote:

words JUDGE Dread spoke :- "I am the law".

... if it is the Stallone version, it is "I am the lurr"

Thanks (0)
avatar
By johnjenkins
03rd Jun 2015 11:50

It is the role

of HMRC to be independent and oversee the tax system not to bully people into making them pay the most tax (and NI) possible by stealth.

Thanks (2)
avatar
By AndrewV12
03rd Jun 2015 11:51

All to late in the day Des

I see the good Des Hudson has seen which way the wind is blowing on the subject and positioned himself accordingly.

 

If he had advised on the above 20 Years ago he would be seen in a different light, but  to come out with his views now, 20 odd years since the horse has bolted cuts no ice with me.

Thanks (0)
avatar
By johnjenkins
03rd Jun 2015 11:55

Aha

the old loophole ploy. Why do you think Governments leave loopholes? They know a talented few will exploit, but as long as it's only a few - no harm done. Now if you have no loopholes then the talented few would find some other way around what they don't like. So damage limitation is the name of the game.

Thanks (0)
Should Be Working ... not playing with the car
By should_be_working
03rd Jun 2015 11:55

Ah Yes, "Society"

The trouble with appeasing the mob, as the speaker effectively suggested, is that 'society' is getting its tax expertise from journalists; and general news hacks, bless 'em, get their tax knowledge from (a) political activtsts of a certain hue and (b) Richard 'PCS' Murphy et al.

 

As a lawyer, you'd think he'd know the difference between the Court of Public Opinion and the real thing.

 

One can only hope that with Margaret 'Stemcor' Hodge now stepping down to allow the PAC to do its proper job once again, we'll start to hear less of this sort of rubbish.

Thanks (1)
avatar
By MBK
03rd Jun 2015 11:59

IMHO ..

@andrew.hyde has hit the nail on the head.

There is a world of difference between structuring something using tax law as parliament intended it to be used and structuring something other than with parliament's intention. The former (in my book) is fine - the latter is not.

Quite a few of the posters on here seem to be saying something along the lines of "if you can't write the law well enough to stop us doing something which is not in accordance with the original intention, then tough". It's that kind of attitude that, in my view, rightly brings the opprobrium of society down on the heads of the tax profession. That attitude is the mentality of the criminal.

I know people will say that you can't always devine what the intention of the law was - but it can't be beyond the wit of man to fix that.

 

Thanks (2)
avatar
By Gimlet2008
03rd Jun 2015 12:03

Something in it ...

I think there is something in the statement that its not now acceptable to be seen to be avoiding tax through (e.g) schemes.

Certainly its also true that interpreting what this means throws up a myriad of difficulty  and its certainly also true that the lawyers have not wholly resisted being involved ! . 

Thanks (0)
avatar
By jonstewart
03rd Jun 2015 12:04

Socially acceptable?

I am not sure we have many clients who ask us to advise them on what would be the socially acceptable amount of tax they should pay (whatever that amount would be!). 

Thanks (1)

Pages