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Lawyers could be hit with massive fines simply for advising on the legality of tax schemes under the Treasury’s beefed up anti-avoidance proposals, it has been alleged.

It is claimed that a planned crackdown by Revenue and Customs would put “many tax advisers in an impossible position”.

Tax lawyers fear that even merely advising on whether a client’s tax arrangements were legal would put the professional at risk of a fine if the taxman ultimately disagreed. On the other hand, refusing to advise clients would result in lawyers risking professional negligence claims.

The warning came on the eve of the end of HMRC’s consultation on strengthening tax avoidance sanctions and deterrents, which includes a range of proposed penalties such as fines of up to 100 per cent of tax avoided.

The consultation also proposes a naming-and-shaming regime for tax professionals, including lawyers, accountants and trustees, who enable clients to avoid tax using schemes that HMRC regards as “defeated”. HMRC is seeking increased and broad powers to define so-called legitimate tax planning in contrast to “unacceptable tax avoidance”. Many tax expert lawyers consider that the move will make application of the regulations far more subjective.

The system HMRC is proposing would place advisers’ responsibilities to their clients in direct opposition to their responsibilities to the taxman.

The proposed structure would leave lawyers, accountants and other tax specialists stuck between a rock and a hard place. HMRC’s power to define what is tax avoidance and what isn’t means that it will effectively be judge, jury and executioner when it comes to punishing those in the tax profession.

 

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