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New sanctions for enablers of tax avoidance are too broad

by Susie Hughes at 13:19 23/08/16 (News on Business)

A law firm has expressed concern that the proposed application of the new sanctions for enablers of tax avoidance are too broad.

Pincent Lamsons says that the definition of avoidance is far too wide at present and there are concerns that measures will be applied retrospectively, Fiona Fernie, Partner at the international law firm, said: “Some aspects of these proposals go too far and could end up capturing traditionally accepted tax planning. “The document lays out a definition of tax avoidance which is far too broad at present. Advertisement “The wording of the proposals suggests that measures will cover not only all schemes counter-acted by the General Anti-Abuse Rule (GAAR) or notifiable under DOTAS but also those which have simply been the subject of a targeted avoidance-related rule or ‘unallowable purpose test’ contained within a specific piece of legislation. This is incredibly wide-ranging and the criteria need to be tightened. “Restricting the proposals to all schemes notifiable under DOTAS would be a more sensible approach. “There are also concerns over whether the new measures and sanctions will be applied retrospectively, thereby capturing historic cases and schemes. “Given the emphasis placed on deterring future avoidance in the proposal, and influencing taxpayer behaviour going forward, such an approach would make little sense. A line in the sand should be drawn and clear timescales set out- the legislation should apply to all cases after a future date.” Reasonable care The consultation document also proposes defining how tax avoiders are judged to have ‘taken reasonable care’ to avoid errors in their tax returns, thereby making penalties easier to impose. It also proposes moving the burden of demonstrating that this ‘reasonable care’ was taken onto the taxpayer, rather than HMRC. Fiona Fernie said: “Moving the burden of demonstrating ‘reasonable care’ onto the taxpayer would be a significant concern. The time and resources it would take are considerable. Compliance costs for individuals have soared over recent years, and this would be an unreasonable additional ask. “It is a David and Goliath situation- the Revenue has huge resource at its disposal whilst the average everyday taxpayer does not. “The Revenue can be somewhat rigid when considering what constitutes ‘reasonable care’ in the current absence of any real definition. If a taxpayer has taken advice from a reputable professional, with no obvious reason to doubt its credibility HMRC should recognise that for many taxpayers with no tax training, that does constitute reasonable care.” Tweet -- If you wish to comment on this article, please log in and use the Reply button below. Registering is free and easy - see 'Join Shout99'. - Susie Hughes © Shout99 2016

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