This post is a post-script to a couple of posts I originally wrote for the TaxBuzz blog. As I no longer update that blog I have to comment here. And, yes, I HAVE to comment. Two people with whom I worked some years ago have been found guilty and imprisoned for their part in a fraudulent tax scheme. And I think there are lessons here for ambitious accountants in practice.
Three years ago, in October 2009, I set out my views on reports that: Vantis tax advisers to face charges of “cheating” re tax scheme. I admit that I doubted that Messrs Perrin and Faichney had done anything different to dozens of other promoters of tax schemes. I felt sure that HMRC were taking the case to act as a deterrent. I doubted that the accused had done anything beyond promote an aggressive scheme supported by “Counsel’s Opinion”. As is well known, I am no fan of such schemes but equally, having worked with Perrin and Faichney, I found it hard to believe that they would do anything fraudulent.
I wrote two follow up pieces along similar lines: Wives of promoters of Vantis tax scheme also facing charges and Tax and financial advisers in court again re ‘failed’ tax scheme.
Well, in the light of the latest reports, I have to accept that, unless there has been a miscarriage of justice, “Faichney, who was managing director of Vantis Tax, worked with his deputy David Perrin to share £4.5m in profit from a fraudulent tax scheme“.
So, I was wrong and I admit it. I am shocked that two ex-colleagues bent and broke the rules to the extent now found proven in Court. When I worked with them I trusted them. Neither was a qualified accountant. I played bridge with David Perrin who was very bright and very commercial when it came to quoting fees for tax planning work. I worked more closely with Roy (Robert) Faichney who promoted me shortly after I joined WJB Chiltern in 2001. Both were involved in my recruitment to the firm. (I should add that I have neither seen nor spoken with either of them for many years).
During my 4 years at the firm I attended many seminars at which Perrin and Faichney lectured to accountants about tax planning ‘opportunities’. Many of the more detailed technical arguments were beyond me but I was satisfied that their claims were supported by Tax Counsel and arguable interpretations of the law. Or so I thought at the time. And they clearly won over many accountants in practice too.
Now I am wondering. How robust were their technical arguments, really? Did they win me over with their charm and confidence? Did their plans, even then, go beyond the parameters of legal but aggressive tax planning? How many of the tax schemes that they put in place for clients really worked? By which I mean, how many such schemes, have been accepted as effective by HMRC after having been challenged? I wonder how many are still being negotiated? And I wonder how many accountants in practice were suckered into promoting the fraudulent tax scheme to their clients. Reports suggest that it was promoted via a network of contacts to over 600 clients including “an Oscar winning film executive, a celebrity psychiatrist, senior City bankers, top barristers and company directors.” I wonder how many other schemes devised and promoted by Perrin and Faichney have or will also be successfully challenged?
Faichney and Perrin were first interviewed by HMRC in 2006 in relation to the tax scheme in question which had been promoted some years earlier. It has taken six years for HMRC to get a successful prosecution. Similar (and longer) time lags are commonplace when it comes to disputed tax schemes.
So what are the lessons for ambitious accountants? I would suggest just three:
- The fact that someone, whether a colleague or a client, seems to be honest when you first form a judgment as to their character, does not mean they will always resist temptation. Whilst we cannot go through life being suspicious of everyone, we should keep an open mind. We should not allow our faith in someone we trust to blind us to the possibility that they have overstepped the mark.
- Following on from the above, if a tax planning opportunity seems too good to be true, it probably is. Ask yourself whether fraud could be alleged – over and above any refusal by HMRC to accept the tax consequences of the scheme? If ANY element of the scheme involves a nudge-nudge, wink, wink, undisclosed agreements or arrangements, or any deliberately misleading statements, beware.
- And remember what happened to Perrin and Faichney. The fact that the promoters of any tax scheme seem credible and have a strong background of ‘success’ is no guarantee that all will be well in the future. Perrin and Faichney had loads of experience and their credibility was boosted by them working for one of the (then) top accountancy firms, Vantis Tax. Any promoters who approach you could seem just as credible but may themselves have got greedy. How would you know?
More importantly to me has been that you have consistently cautioned people over these schemes. On that critically important issue, I’d say you’ve been proved right.
As I have said elsewhere I also worked at Chiltern and for Roy Faichney although my stay there was not much more than a year. It is where you and I first met, Mark.
And yes, I did work on tax avoidance schemes at Chiltern, which some might think were very aggressive although in fact we were careful not to go beyond certain limits, which is more than one could say for a number of other firms operating at the time. Everything we did was tailored to the specific client. We did not work on template schemes which are sold to large numbers of clients. All our introductions came from practising accountants or tax advisers.
I make this point because everything we did was backed by Counsel’s Opinion, either specifically for the client or in more general terms where we just ticked the boxes of Counsel’s general outline.
I don’t know whether the Vantis scheme was backed by Counsel’s Opinion although one might have expected it would be, but it seems to me that there can be a disconnect between what Counsel says will work and the measures taken to deliver the end result afterwards, which was the manipulation of the share prices on the Channel Island Stock Exchanges.
There is no doubt the Vantis scheme was very aggressive and would be very unpopular under the current climate. Counsel do turn out to be wrong, but one cannot imagine share price manipulation would have been a plan hatched in Chambers.
I am confused about what has happened. It is hard to believe that anyone could have supposed that HMRC would not latch on to the share price scam delivering the tax relief.
Mark
Interested in your comment
“Neither was a qualified accountant.”
Maybe I missed it in the other coverage of this story, but had assumed that both were CA’s of one sort or CTA’s. Not suggesting presence or absence of qualification proof of propriety or otherwise.
As you say, should always concerned about schemes which seem to be too good to be true (and also about implementation failures).