The tax profession’s role in aiding tax avoidance and evasion will come under scrutiny after the Treasury sub-committee launched an inquiry into tax avoidance and evasion.
As the boundary between what is acceptable and unacceptable tax planning attracts increasing public attention, the Treasury sub-committee will hold to account those who design and sell such schemes, as well as investigate what has been done to reduce the amount of tax lost to avoidance and offshore evasion.
Announcing the inquiry the chair of the Treasury sub-committee MP John Mann made no bones about putting accountants who facilitate these schemes under the spotlight.
“We’ll be pressing those who seek out loopholes to get out of paying tax and the organisations that help them to give answers to Parliament about the revenue that we are all losing out on,” he said. “We’ll be holding all those involved to account to make sure that no one — however wealthy — can dodge paying the tax they owe.”
HMRC’s approach to evasion and avoidance will also be examined; in particular, the inquiry will explore whether HMRC has the resources and powers to curb aggressive tax schemes and review the tax gap.
‘Tax abuse is a public concern’
As tax havens remain headline news, with cases like the Panama Papers revelations attracting criticism from MPs and the media alike, the inquiry wants to identify any shift in avoidance and evasion since 2010, what progress HMRC has made in preventing non-compliance and the role the UK’s Crown dependencies and overseas territories play.
Mann added: “Tax avoidance and evasion remain matters of serious public concern. HMRC has been given additional funds in recent years to address the issue, yet the tax gap for avoidance and evasion is still billions of pounds.
“The sub-committee will look into how well HMRC has used these additional funds to close the tax gap, whether its strategy to reduce avoidance and offshore evasion has worked, and whether HMRC’s resources are sufficient.”
The tax abuse hearings are part of three tax inquiries announced: the Treasury will examine the burden of VAT and HMRC’s “sweetheart deals” will come under question when the sub-committee explores the conduct of tax enquiries and the resolution of tax disputes.
PCRT governs the tripartite relationship
The public’s frustration towards aggressive tax avoidance prompted the shadow chancellor to suggest that large firms should take a Hippocratic Oath. Echoing ICAEW’s chief executive Michael Izza’s response to John McDonnell, the CIOT’s John Cullinane highlighted in his response to the parliamentary reviews how the Professional Conduct in Relation to Taxation (PCRT) governs the conduct of tax professionals.
“We believe the PCRT Standards for Tax Planning make it clear to any of the small minority of tax professionals who are tempted to facilitate and promote tax avoidance schemes that this behaviour is not acceptable,” said Cullinane.
HMRC endorsed the PCRT as an acceptable basis for dealings between members of the bodies and the tax department and used it as a guideline to constructing the Standards for Agents.
Perception trickles down
ICPA chair Tony Margaritelli is hopeful that the inquiry will change the perception of an accountant, especially for smaller firms.
“When tax avoidance and evasion gets on the front pages it does repeat the perception of the accountant as someone who facilitates certain people to not pay their taxes. That is what percolates down,” he told AccountingWEB.
“I don't know who is responsible but we look to our leaders, they've got a higher duty of care because they are the Big Four, and they need to explain what was their logic and their thinking behind what they did or they didn't do in this respect.”
But there is another side to this story that Margaritelli doesn’t want lost in the furore over high-value individuals not paying tax. “HMRC has been cracking down on small and micro businesses all the time, harder and harder as they seek to close this supposed tax gap. And that's not been picking up the coverage that it should be,” he said.
Have your say
The Treasury is now seeking evidence. The deadline for written submissions is Thursday 31 May 2018. You can make a written submission here.
About Richard Hattersley
Richard is AccountingWEB's practice correspondent. If you have any comments or suggestions for us get in touch.