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A leading law firm has criticised HMRC's Working with Tax Agents document, saying it contains clauses that could lead to tax advisers moving overseas to avoid an increasingly burdensome system of regulation.
The Revenue is seeking the authority to impose fines and other penalties on tax agents who the department believes are assisting non-compliant taxpayers – and McGrigors claims this represents the latest phase in the taxman’s strategy to change taxpayer behaviours.
‘The current phase of this strategy has focused on taxpayers and employees of corporate taxpayers – notably, the obligations on senior accounting officers. Now HMRC are turning their attention to tax agents,’ said the company.
The department’s Working with Tax Agents consultation includes a section that reads: ‘Where there is sufficient evidence that the risk arose as a result of deliberate actions by the tax agent, [we] would have to consider its relationship with the practitioner. Options for [us] could include a refusal to deal with the tax agent in future.’
These lines led McGrigors partner James Bullock to remark: ‘It is one thing to penalise advisers who are consistently careless or who facilitate tax evasion – but HMRC already have the tools to deal with that non-compliance and could probably use the tools they already have more forcefully, rather than continuously seeking new powers as they seem to be doing.'
Mr Bullock added: ‘If HMRC make life too restrictive for UK-based agents and accountants, some may relocate overseas, thereby creating a ready market in offshore tax advice for UK resident taxpayers. This is the very thing that [the department] wishes to avoid.’
In the Working with Tax Agents document, unveiled during this year’s Budget, the Revenue is consulting on new powers in the following areas:
- Requiring tax agents to produce risk assessments in respect of their own clients.
- Easier access to tax agents’ paperwork.
- Making it easier to impose penalties on agents for deliberate default, including linking the amount of penalty to the tax at risk.
James Bullock said: ‘It is important that any increase in HMRC’s powers is matched by very strong safeguards to protect taxpayers, and it is almost certainly the case that the vast majority of tax agents are behaving properly and legitimately.
‘The powers regime introduced over the last couple of years is proving deeply unsatisfactory… [and it is] is increasingly providing the Revenue with an open goal in terms of the nature and amount of information that it is able to obtain.’
In June, the head of Revenue powers, Simon Norris, said there was ‘a group within the tax profession… who don’t keep themselves up to date or who get things wrong, and [there is] a tiny, tiny minority who actually go across the line of what is legal – and it is only right, as with other areas of the tax system, that those people are policed’.
In a live webcast by the department, Mr Norris added that the aim of Working with Tax Agents is to ‘getting a better relationship’ between the taxman and advisors, and forming a ‘working relationship where we really do trust one another’.
