Philip Hammond has reinforced an incoming penalty for those who enable the use of a tax avoidance scheme that HMRC later challenges and defeats.
As revealed in the Autumn Statement and originally signalled back at Budget 2016, legislation will be introduced to penalise not just those who use defeated tax avoidance measures, but those who enable it, including professional advisers.
According to the report this new regime will reflect “an extensive consultation and input from stakeholders and details will be published in draft legislation shortly.” However it remains to be seen what the new regime looks like and we are yet to see HMRC’s follow-up to the responses submitted to its August consultation.
The government will also remove the defence of having relied on non-independent advice as taking ‘reasonable care’ when considering penalties for any person or business that uses such arrangements.
John Cassidy, tax investigations partner at Crowe Clark Whitehill, said this was a worrying aspect for qualified professionals: “A scheme’s salesmen are often tax experts themselves and provide presentations, explanations and documents that are convincing and supported by opinions from expert tax counsel. It may not be obvious to the taxpayer that he is at risk of penalties if he doesn’t consult another tax expert.
“It is also difficult to define where the boundary will be. To outline a common example, a person is introduced to an apparent expert in tax planning by his normal accountant who earns a commission for the introduction but has also gone the extra mile and obtained his own counsel’s opinion before recommending the scheme. Is the taxpayer still open to a penalty if he fails to seek yet another tax expert for a third opinion? Surely this is not the intention,” Cassidy said.
Hammond said the government's anti-avoidance measures set out in the Autumn Statement will raise £2bn over the forecast period.
The Association of Accounting Technicians (AAT) commented on the Chancellor’s commitment to further strengthen sanctions and deterrents on disguised remuneration tax avoidance schemes and non-doms.
“While the clampdown may be helpful to the Treasury’s coffers, there is a tricky balance to be had. While the British property market continues to be strong, it is possible that cracks may appear if people are discouraged from residing here, and so this may not have been the right time to announce further measures,” it said.
Dawn Register, partner at BDO's tax dispute resolution, added that pressure continues to mount on participants, especially in the build-up to April 2017, where we will see the commencement of the ‘Serial Avoider’s Regime’.
“Most tax professionals have already seen a change in appetite for ‘highly artificial’ tax schemes with many taxpayers being conscious of HMRC’s actions in this area. Those that fail to withdraw could be subject to HMRC’s new ‘naming and shaming’ laws with all the reputational risk and damage that ensues,” Register said.