The dust has now settled on the 2017 edition of January 31st – the day when many taxpayers, plus their beleaguered accountants, breathe a collective sigh of relief as the law-abiding will have filed their online returns by today’s deadline.

This year though, it’s a little different, thanks to new and pending legislation announced by the 2016 budget relating to tax avoidance which has sent “shivers” across the accountancy and financial services industry.

Here at Outhwaite Associates we look to keep up to speed on this ongoing battle, and as far as it is possible we can offer some reassurance and clarity relating to the new arrangements. 

Most advisors and taxpayers will be aware of so called tax avoidance schemes which the government believe have allowed global companies, the wealthy and celebrities to seemingly escape paying their “fair share of tax.”

These have collectively run into hundreds of millions of pounds and caused consternation amongst those modest tax payers who pay up religiously, year after year. As recently as last week the Public Accounts Committee criticised HMRC for failing to clamp down on the tax affairs of the ultra-wealthy.

“The Government has announced changes that are aimed to stamp out so-called tax avoidance and ensure that everybody pays their fair share.

It’s been stated before (by the late Denis Healey, former Chancellor of the Exchequer no less) that the difference between tax avoidance and tax evasion can be the width of a prison cell wall.  These new measures aim to introduce clarity and to establish the difference between legitimate tax planning and schemes that are patently designed to evade tax.”

Subject to continuing consultation, the crackdown includes:

  • Tackling tax avoidance schemes which can be based on transactions with no commercial purpose, manufactured paperwork, attendance at non-existent meetings and other “creative” means.
  • Strengthening tax avoidance sanctions and imposing a financial penalty on “enablers” of tax avoidance schemes including accountants, financial planners and lawyers.
  • Removing the defence against penalties of “reasonable care” for those who rely upon advice provided by the enablers of tax avoidance schemes
  • Introducing a new legal requirement to correct a past failure to pay UK tax on offshore interests within a deadline.
  • Launching extensive industry-wide consultation; details will be published in draft legislation shortly.

These changes have made a lot of people in the profession very jittery but I don’t think anybody who’s running their affairs within current law has too much to worry about. Nevertheless, there is also much nervousness from accountants who are worried about where the line between tax planning and tax avoidance will be drawn

We at Outhwaite Associates would like to see HMRC focusing on tackling the indefensible tax avoidance using manufactured transactions and paperwork and the promoters of such arrangements; they need to pursue these vigilantly by way of measured and balanced investigation underpinned by appropriate legislation rather than what I am seeing from HMRC currently, which is a wholesale pursuit of soft targets for relatively small sums.

When it comes to small businesses and sole traders who are often viewed as these soft targets by tax inspectors, w would urge a proportionate approach to those who are genuinely trying to do the right thing.

And our advice to people considering tax avoidance schemes is that if it appears to be too good to be true, then it probably is! 

Stick to the law, avoid anything that appears artificial or contrived and rely on your accountants’ advice.  In many areas we still await clarity, so always opt for professional advice.

And the best advice for my professional colleagues? Keep an eye on the consultation arrangements, stay engaged and try to have your say.  It’s in all our interests to come up with robust arrangements that are transparent and enforceable.”