A former chairman of the ICAEW Tax Faculty has presented ten "facts" about avoidance schemes that "all accountants need to know" and has dismissed concerns that accountants who do not alert clients to schemes may be risking negligence claims. Mark Lee, chairman of the Tax Advice Network, writing on his TaxBuzz blog, said the first five points provided support for accountants who have already chosen not to advise on such schemes:
1. Accountants should only promote such schemes if they are confident that they understand ALL of the risks and consequences for their clients;
2. Accountants do NOT have to advocate structured tax avoidance schemes;
3. Accountants who promote such schemes honestly will find that typically only around one in ten clients will proceed once they understand all of the risks;
4. Accountants do NOT have to notify all clients that such schemes exist;
5. Accountants are NOT at risk of successful negligence claims if they fail to alert clients to such schemes.
The next five points should be borne in mind by "those accountants who are nonetheless tempted to look further into the subject," he said.
6. Encouraging a client to undertake a structured tax avoidance scheme is much like encouraging them to make a specific investment;
7. It takes a fair amount of time to get to grips with all of the relevant details of a structured tax avoidance scheme;
8. HMRC may announce a change in the law at any moment – leading to rushed (and perhaps botched) attempts to revise the scheme by the promoters;
9. Having committed all that time to learning about the scheme there may be a temptation to persuade someone to "invest" even if they might not otherwise choose to do so;
10. If, some years later, the scheme is ultimately held not to work the client may sue the accountant for failing to adequately highlight the risks.
The blog posts were prompted in part by promotion literature for a tax avoidance scheme using employee benefit trusts. Lee suspected that some of the company directors who had bought the scheme, and were said to be "happily" recommending it to other businesses, were "either unaware of the risks they have taken or omit to mention them to their friends".
The current issue of Tolley's Practical Tax newsletter (28 August) has more on this and other developments including:
- Tax bodies reject agents register proposal;
- Working together, learning together;
- HMRC defends interest rate increase;
- Liechtenstein deal signals end of banking secrecy, OECD claims.
