Giving Advice on How to Avoid Tax? Prepare To Be Fined

As part of a series of measures announced in Budget 2016 to counteract tax evasion it seems an even tougher stance could soon be applied thanks to the £1 billion extended to HMRC to tackle evasion.

Measures to criminalise failing to prevent tax evasion now are joined by plans set out in a fresh HMRC consultation hoping to be a further deterrent to those looking to reduce their tax liability.

The consultation shows how the taxman is looking to broaden the justice brush when a tax avoider is caught out. At the moment the actual tax avoider is fined harshly if the avoidance scheme they are using is found to be illegal and defeated through court action. However, the Taxman now looks to go up the chain and also fine those who are advising on joining such schemes.

In essence this means accountants, tax advisers and tax planners who advise their clients to join schemes that can mean little to no tax is paid upon their earnings can now face paying up to 100 per cent of the clients tax bill as a penalty.

Under the banner of POTAS (Promoters of Tax Avoidance Schemes) legislation, an enabler of tax avoidance is classed as someone who designs, promotes and markets avoidance schemes as well as others who benefit from the running of such schemes.

In an example of a contractors or freelancers scheme where the contractor is advised to join a scheme where they are paid in the form of loans in order to avoid tax, a number of people would be fined:

1. The person who created the scheme.
2. Anyone receiving referral commission for recommending clients to the scheme - this may be an Accountant, Tax Planner, Tax Adviser, an Independent Financial Adviser (IFA) etc.
3. Companies set up to facilitate the running of the scheme.
4. The contractors/freelancers who are existing users of the scheme and have received referral commission for recommending new clients to the scheme.

Under the current 2016 Finance Bill the fine who be 100 per cent of the tax avoided or £3,000 if it can be proven that tax avoidance was not intended or an unknown effect of joining the defeated scheme.