No sooner had The Times reported on the High Court case of Mehjoo v Harben Barker in 2013 than variations on their headline were being repeated as fact: “Judge says accountants must help clients avoid tax”. The truth, as ever, was and remains somewhat more nuanced.
At the time I wrote a detailed piece for AccountingWeb analysing the decision from the perspective of general practice accountants. In my 1,500 word article I also explained the rationale for my conclusions which I have copied below for readers of this blog
The law had and has not changed. There is no new obligation on accountants to advise on fancy tax schemes. Nor is there any requirement for them to understand complex tax schemes. Thus there is no need to protect accountants from such a dubious obligation (as one commentator has demanded).
- The judge did NOT criticise the accountants for failing to advise on a complex tax scheme.
- They were also NOT held liable for failing to advise on such scheme.
- There was NO suggestion that all accountants need to be tax experts.
- And there was NO suggestion that the accountants should have been aware of fancy tax planning schemes. On the contrary.
The key issue is that in 2004/05 any reasonably competent accountant would have given a non-dom client the same advice. The accountants in question failed to do this and, crucially, they failed to refer their client to someone who had the necessary expertise to provide, what was, ‘standard’ advice at that time.
For most conventional clients the position would have been far less clear cut. The question would always have been – what would a reasonably competent accountant have advised? And was there a generally agreed ‘solution’ that anyone who really understood the situation would have advised be undertaken? Very few tax avoidance schemes would satisfy these tests.
In recent years very few reasonably competent accountants would give clients positive advice to get involved in a fancy tax avoidance scheme. Thus, as I have long argued, there is no serious prospect of anyone being successfully sued for failing to do this.
In the High Court the judge explicitly confirmed the advice in para 2.5 of the Guide to Professional Conduct for those working in tax. This forms part of the members’ handbook of most, if not all, of the major accountancy and tax bodies in the UK
The Judge stated that the defendants were “reasonably competent generalist accountants” and that they therefore “had a contractual duty or concurrent tortious duty to advise the Claimant….that he should take tax advice from [specialist tax advisers].”
This is a long established and uncontroversial conclusion.
This case is however a topical reminder of the dangers of trying to go it alone. And of course allows me to remind readers that I established the Tax Advice Network in 2007 specifically to help general practice accountants.
You can choose any of the members of this independent Network to obtain specialist tax advice. And, as the Mahjoo case shows, you should seriously consider doing this whenever your clients have tax issues, challenges or situations that may require tax expertise beyond your day to day experience.