Although Tax Avoidance is no longer headline news we continue to see the repercussions of recent media stories. Last week I referenced the comments of the CIOT President. He suggested that there may be a need to consider toughening up the financial services mis-selling rules to attack the promoters and sellers of tax schemes that have no real prospect of working. I wrote about this here under the title: Is tax scheme advice comparable with investment advice?
Now it is the turn of the CEO of the ICAEW. Michael Izza has posted on his blog the most forthright comments I can recall on the subject. His words will shock some members of our profession. Although I would suggest that in the main these will be:
- that minority who have been active promoters of tax avoidance schemes; and
- those naive followers who enjoyed the commissions they earned and who have yet to realise that their blind faith in the promoters’ promises may not be justified.
Two years ago I wrote what turns out to be a prophetic piece on this blog. It included the following:
“There are plenty of people who will tell you that you can generate a good commission whenever you persuade a client to ‘invest’ in a structured tax avoidance scheme. They are right. Such schemes are (usually) legal and fully disclosed to HMRC. So what’s the problem?
Let’s start with the need, for most qualified accountants, to comply with their professional body’s fundamental ethical principles. These include acting with integrity, objectivity and professionalism. Clearly this means only advising on things you understand and being clear that the prospect of commission is not uppermost in your mind when advising clients. Of itself this does not preclude you from advising clients to consider structured avoidance schemes.”
I then set out seven key points that it is too easy to overlook when presented with an otherwise compelling proposition by an enthusiastic promoter of such schemes. You can read the full post here. Last week’s posts covered related points: Why weren’t all accountants promoting those tax schemes? and Ten things accountants need to understand about tax schemes.
It is now six years since I chose to give up being a tax adviser. One of the reasons I did so was an increasing concern I had re tax avoidance schemes and the ‘moral’ issues. Rather than impose my views on anyone else I simply stopped advising on tax issues. I therefore welcome Michael Izza’s recent comments and I was absolutely delighted to see such a clear statement from the ICAEW. You can see the original here but I have copied it below to encourage debate here as well:
“I believe that there is no place for our profession in the creation or maintenance of these sorts of tax schemes.
As ICAEW Chartered Accountants, our code of ethics, which is the foundation for how we behave, is clear that we must do nothing to bring our profession into disrepute. Any members involved in aggressive tax planning through the sorts of schemes highlighted by The Times are doing exactly that, and are risking the reputation of the vast majority of our members who provide valuable and honest support to businesses and individuals and who want nothing to do with such schemes.
Looking at it through the public’s eyes, people find it hard to appreciate, let alone condone, the difference between avoidance and evasion, especially given the sums involved and the current economic situation. Anyone behind the type of tax schemes outlined in The Times must be aware that what they are dealing with is beyond the bounds of what is reasonable and responsible tax planning – all the more so if the schemes cannot be set out fully in writing or rely on information being conveyed orally.
In my view, taxpayers will increasingly want to be reassured that their tax affairs are dealt with in a responsible and professional way. ICAEW Chartered Accountants should be trusted to abide by our Code of Ethics and in the coming weeks we will be looking at what more can be done to reinforce that trust.
In these difficult times, any ICAEW Chartered Accountants who are engaged in the kinds of schemes highlighted in The Times need to look at themselves in the mirror and ask – am I upholding the honour and reputation of ICAEW Chartered Accountants and am I seen to be doing that? If the answer is no then they need to ask themselves whether they want to belong to our profession or not?”
As implied, I feel that my long-held views on the subject are vindicated and that the pressure on accountants to promote such schemes should reduce. Of course there will continue to be some grey issues and I know plenty of people will miss the point of Michael’s statement. It’s not anti tax planning. It’s not anti tax avoidance. It’s anti aggressive tax avoidance schemes.
I’d welcome your views and comments below.