If this blog was a redtop newspaper the headline might have read: “Tax Barrister blows the lid off Tax Schemes scam”. I admit I was tempted!
Regular readers will know that only very occasionally do I use this blog to reference tax related topics. When I do so my observations are still focused around helping accountants in practice.
I have long been dismissive of those promoters and commentators who have sought to encourage accountants that they MUST advise clients about tax schemes. By which I mean those schemes that HMRC regard as abusive or aggressive.
My cynicism about such schemes contributed to me choosing to leave the world of tax advice in 2006. Since then my stance has been justified many times over – see links below.
Jolyon Maugham, a tax barrister at Devereux Chambers, has now ‘blown the lid off’ what some of us have long suspected.
In a well written blog post Jolyon effectively accuses a small group of tax barristers of knowingly giving positive opinions of tax schemes that are unlikely to succeed.
The opening paragraph of his blog (which has been republished in Taxation magazine) gives you a flavour of his views:
I have on my desk an Opinion – a piece of formal tax advice – from a prominent QC at the Tax Bar. In it, he expresses a view on the law that is so far removed from legal reality that I do not believe he can genuinely hold the view he says he has. At best he is incompetent. But at worst, he is criminally fraudulent: he is obtaining his fee by deception. And this is not the first such Opinion I have seen. Such pass my desk All The Time.
Later he notes:
The [promoters] will then go out and sell that idea to taxpayers. In the case of individual taxpayers, they will sell it, typically, through IFAs to whom they will pay a sales commission.That sales commission, too, can be very substantial, running in some cases into hundreds of thousands of pounds for a single client. So the IFA can be strongly incentivised to persuade their clients that the idea works and – should the taxpayer client care about such things – that it is not aggressive tax planning.
What happens next?
The taxpayer will make their tax return, HMRC will disallow the beneficial tax treatment, and the taxpayer will challenge that disallowance in the tax tribunal (causing years of uncertainty and substantial professional fees). Should that challenge fail, the taxpayer will lose whatever money he put into the idea, face an unexpected tax charge and, very often, be publicly pilloried into the bargain.
Suffice it to say that Jolyon’s expose further supports my view that accountants can safely ignore all those promoters encouraging them to introduce clients to their tax schemes. Even those apparently ‘supported by Leading Tax Counsel’. Sad to say, these opinions may be costly to obtain but also potentially worthless. As we have seen so many times in recent years, ‘abusive’ schemes are being successfully challenged all the time – despite the assertions of their well paid promoters when clients were being encouraged to ‘invest’.
If you have clients being encouraged to invest in a scheme that seems ‘iffy’ to you, Jolyon’s blog will give you added confidence to provide independent constructive advice about the risks.