Accountants and financial advisers who recommend contentious tax avoidance schemes could face tough new penalties under HMRC proposals.< The plans set out in a consultation document, could mean that ‘enablers’ of tax avoidance schemes face fines of up to 100 per cent of the underpaid tax. The Government says that tax avoiders face significant costs when HMRC defeats them in court, but their advisers bear little risk.  Now the government wants ‘enablers’ to face fines as well.  “People who peddle tax avoidance schemes deny the country of vital tax revenue and this government is determined to make sure they pay,” said Jane Ellison, The Financial Secretary to the Treasury.  “The vast majority of their schemes don’t work and can land their users in court facing large tax bills and other costs.  These tough new sanctions will make would-be enablers think twice and in turn reduce the number of schemes on the market.”

HMRC defines an ‘enabler’ as anyone who designs, facilitates and promotes tax avoidance arrangements.  Financial advisers or accountants who simply introduce their clients to scheme promoters could be caught under the proposed rules.

The plans have been widely welcomed. Chartered accountants’ professional body the ICAEW said: “It has been a matter of concern to ICAEW that many promoters appear to operate outside of any professional rules or oversight. As a professional body, ICAEW does not expect its members to be involved in the creation, facilitation and promotion of aggressive tax avoidance schemes.”  It is however concerned that the rules are not drafted too widely, “could a member firm be an enabler where it acts as a tax agent and submits a return for a taxpayer, which includes a tax avoidance scheme, which the member did not advise on?

James Burgoyne, Director – Claims & Technical, Brunel Professional Risks. “The government has been focusing on measures designed to tackle illicit finance and tax dodging.  These new proposals are welcome as they will bring clarity to the role of accountants and other advisers in recommending tax avoidance schemes.  While fines are never covered by professional indemnity insurance policies, it is likely that some insurers will want to know more about firms’ tax planning services before they offer cover as a result of these proposals.

The publication of the consultation document has been widely reported, including by the BBC, the ICAEW and KPMG.  HMRC’s press release and consultation document are available on the government’s website.