In the light of media reports related to ‘selebs’ tax affairs and their use of K2, icebreaker and other ‘legal’ tax avoidance schemes, some accountants may find the ten facts highlighted below to be of value.

As I explained in my last blogpost, (“Why weren’t all accountants promoting those tax schemes?“) the media reports are misleading when they imply that structured schemes are pretty straightforward or ‘easy’. The only other people who perpetuate this myth are either investing a fortune in developing the schemes or earning a commission by promoting them. Either way they can hardly be relied on to be objective.

Implicit in most of the recent media reports about the use of ‘abusive’ tax avoidance schemes is the idea that they are only for the wealthiest of taxpayers. This is partly due to the level of fees payable before a client can utilise the scheme. Leaving this to one side there are ten things accountants need to understand and remember about tax avoidance schemes:

  1. Accountants should only promote such schemes if they are comfortable doing so and are confident that they understand ALL of the risks and consequences for their clients;
  2. Accountants do NOT have to advocate structured tax avoidance schemes;
  3. Accountants who promote such schemes honestly will find that typically less than one in ten clients will proceed once they understand all of the risks and downsides;
  4. Accountants do NOT have to notify all clients that such schemes exist;
  5. Accountants are NOT at risk of successful negligence claims if they fail to alert clients to structured ‘abusive’ tax avoidance schemes;
  6. Encouraging a client to undertake a specific structured tax avoidance scheme is much like encouraging them to make a specific investment – is it something a professional accountant can do if integrity and independence are important qualities;
  7. It takes a fair amount of time to get to grips with all of the relevant details of a structured tax avoidance scheme and even longer to compare one with another;
  8. HMRC may announce a change in the law at any moment – leading to rushed (and perhaps botched) attempts to revise the scheme by the promoters. It is only a matter of time before the long-threatened retrospective changes are introduced to negate the hoped for tax advantage;
  9. Even after an accountant has committed loads of time to learning about a scheme they must still resist any temptation to act unprofessionally and to persuade a client to ‘invest’ if they might not otherwise choose to do so;
  10. If, some years later, the scheme is ultimately held not to work the client may sue the accountant for failing to adequately highlight the associated risks.

Together these ten facts should provide support for those accountants who choose not to advise clients on structured avoidance schemes. This list is an updated version of such lists that were previously published on the TaxBuzz blog.

I’d be very happy to explain or expand on the ten facts above and also to receive and debate comments below if you have a different view.

Related posts about tax avoidance schemes can be found on the TaxBuzz blog:

– Tax avoidance schemes – a simple guide
– Naive promoters of tax avoidance schemes

I have written a 10,000 word ebook drawn from my talk on How to avoid professional negligence claims, containing tips and risk management advice for accountants in practice. You can buy the book or download a summary for free here>>>