This is a very different blog post to usual. I hope it will be of interest to accountants and tax advisers generally even though it does not contain any of my usual insights, guidance and advice.
Thirteen years ago, in July 2008, I authored the lead comment article in Taxation magazine: Why I gave up giving tax advice.
Here is an abbreviated version of that article. I suspect much of it will resonate with accountants and tax advisers of a certain age. I’m not sure much has changed for the better during the last 13 years!
I tell people that I was lucky to reach, what I considered to be, the top of my profession.
I’d been a tax partner in the London office of two large firms, headhunted twice due to my reputation and profile, elected as Chairman of the ICAEW Tax Faculty 2003-2005 and awarded a fellowship of CIOT in 2006.
When I left BDO in 2001 I had already decided that I didn’t want to be a tax partner in an accountancy firm again. I’d worked in 4 such firms since qualifying in 1982 and been a tax partner in two of them – and I still rate both of them highly. But, no, I did not want any more of that ‘audit vs tax’ office politics that seems to be ever-present in possibly all accountancy practices.
I recall talking with Robert Maas after the CTA Address in 2001 and he convinced me not to turn my back on the world of tax.
I went on to run the Tax Support for Professionals team at WJB Chiltern, the consultancy that was subsequently acquired by BDO.
In 2006 I decided to stop giving tax advice and also to stop working for anyone else. Instead I chose to focus on those elements of my career I had most enjoyed: speaking writing and mentoring.
The following year I also started an online business inspired by my time at Chiltern. So I launched the Tax Advice Network, now the UK’s largest and most successful lead generation website for specialist tax advisers and accountants. Crucially this has never involved ME in giving anyone any tax advice!
Looking back there were three catalysts for me choosing to move away from roles that required me to provide any more tax advice:
1 – An increasing degree of frustration with developments in tax legislation; this lead to
2 – A lack of confidence in my own ability to keep sufficiently on top of current developments; and
3 – An awareness of the growing incidence of professional negligence claims and the impact these can have on one’s business and personal life.
First and foremost was my frustration with the tax system. I didn’t want to struggle any longer to keep on top of the constant tax changes, many of which seemed capricious, illogical and in danger of bringing our tax law into disrepute. I hated the caveats I felt it necessary to give to clients when I was being paid for my advice. If there were choices to be made I wanted to be able to indicate what I would do if I was the client, but I was finding that increasingly difficult to decide.
There was also the work I had been doing with the ICAEW Tax Faculty. In particular the insights gained into the day to day difficulties faced by smaller practitioners over and above the stories I encountered first hand during my talks around the UK.
As a result, the idea of running my own practice, providing high level (or even more day to day) tax advice was not a serious prospect. I felt it would be too lonely and risky for me to advise on tax without having day to day contact with other trusted tax specialists.
For some years I had also been acting as an expert witness in the area of professional negligence claims against accountants. As a result I had seen at first hand how easy it was for well intentioned accountants to fall into the traps that lead to such claims. Despite their good intentions, they may lose out if they are shown to have failed to act in the way expected of a reasonably competent accountant.
No one has ever suggested such failings in my work nor was there any reason for me to suspect that any such claims would arise in the future. But still I was concerned.
I’d seen how easy it was to try too hard to help a client, to try to cover up one’s limited knowledge, to miss that crucial little detail that makes all the difference and to take on work that ought really to be passed on to a specialist. I didn’t want to be that accountant.
These are really the focus of this article and I’m sure that my frustrations were a direct consequence of three key developments in our tax system.
1 – The ever increasing complexity of our tax system that causes inequalities and inconsistencies.
2 – The ‘doublespeak’ of politicians and civil servants as regards our tax system
3 – The prospect of increased powers for HMRC without adequate safeguards for taxpayers.
I had reached the limit as to the number of times I could explain to clients that:
- despite being law abiding citizens and in principle deserving of a widely available tax relief, their circumstances took them just outside the qualification criteria;
- there are apparently arbitrary distinctions in the tax code and inconsistencies in HMRC practice;
there is a continued absence of tax rules to reflect the new working practices of the 21st century;
- we cannot appeal HMRC’s refusal to apply a concession or statement of practice (as we are ‘taxed by legislation, and often only untaxed by concession’);
- tax credit claims can only be backdated by 3 months. Thus if you unexpectedly make a loss in your business you can’t claim the tax credits to which you would have been entitled if you had wasted your time and made a claim (for no credits) at the start of the year, just in case you make a loss;
- there are different rules for computing income for income tax, NICs and tax credit purposes;
- bizarre arguments and distinctions are highlighted in tax cases – albeit I can sympathise with HMRC to a degree when it is evident that ‘clever tax advisers’ have encouraged their clients to ‘push the envelope’;
- we cannot rely on a consistent application of the principles set out in ESC A19 (writing off underpayments of tax due to Revenue error);
- entitlement to claim the small companies rate of corporation tax, is affected by the associated company rules as they apply for various family companies, even if there is no substantial trading interdependence as between them;
- the unrelenting pace of new tax legislation is extending our tax code such that it is possibly now the longest in the world.
Such a list could go on and on.
I resent the suggestion sometimes offered by HMRC that the complexities of which I complain are a response to ‘clever accountants’ thinking up ruses. No. The complexities that were frustrating me were those that affect typical clients and taxpayers who are willing to pay the ‘right amount’ of tax but get caught out because of what I consider to be unjustifiable complexities and complications, such as those listed above.
Recent examples of the issues that are indicative of the sort of frustrations I encountered include:
- the debacle surrounding the 10% starting rate (introduced with a fanfare then removed despite no change in the underlying reason for its introduction – actually it’s still with us in part!);
- the conflation of two separate concepts, ‘tax avoidance’ and ‘tax evasion’, by Ministers and HMRC, leading to confusion and lack of respect for the distinction;
- the removal of any holding or waiting period before qualifying for the lowest rate of CGT and the absence of any policy reason for REDUCING the main rate of CGT from 40% to 18%; it is now more tax effective to make short-term speculative gains than to work hard;
- the sudden tax changes to the residence and domicile rules with no apparent regard for the consultation process previously kicked into the long grass, and all the consequential backtracking;
- the introduction of a £25,000 ’income disregard’ figure for tax credits as the underlying system is not fit for purpose but no one is allowed to admit this;
- the way the Arctic System case was handled. On the one hand HMRC refused to accept it was a test case and thus not deserving of public funding. On the other hand, immediately after the House of Lords found in favour of the taxpayer the Government announced consequential tax changes. Except that the changes were to rules that were unaffected by the outcome of the case;
Again, I’m sure there are plenty of other examples. Those were all off the top of my head. As implied earlier in this article I am no fan of what some might call ‘artificial’ tax avoidance schemes – those that are within the letter of the law but that probably run contrary to the intention of the law.
There’s an element of ‘doublespeak’ here too. By removing myself from roles that require me to provide tax advice I can avoid any continuing struggle here.
Following the merger of the Inland Revenue and HM Customs & Excise, it was only a matter of time before the powers of the new HMRC would need to be rationalised and brought into line. Like most commentators I always assumed this would mean more powers rather than less. The consultation documents and discussions of which I am aware suggest an awareness of the need for balance as between powers for HMRC and the rights of taxpayers.
Equally, despite a degree of sympathy for HMRC’s need to be able to counter tax evasion (as distinct from tax avoidance), I have no confidence that the balance will be enshrined in law. And whilst those at the top of HMRC might intend that more extreme powers will only be used in exceptional circumstances, I fear that in time any such safeguards will be forgotten and of no value.
I should stress that I have met many people at the top of HMRC and have huge respect for most of them. When permitted to do so, HMRC are far better at effective consultations these days than in the past. Sadly however it often seems that they (and therefore we) are just going through the motions, especially when deadlines are too short, changes are introduced within days or multiple issues overlap. This is SO frustrating but, within the professional bodies we keep trying, even though it often feels like we’re bashing our heads against a brick wall.
I suspect that all too often those at the top of HMRC are stuck in the middle between the Treasury and the more day to day face of HMRC. Senior HMRC officials have to do as they are told whilst also struggling with reduced staff numbers. And of course we are all aware that HMRC pronouncements of safeguards for taxpayers are unreliable as it is front line and specialist staff who decide what actually happens in practice.
My post tax-advisory career started in 2006. Two years later when I wrote the article in July 2008 I was still close to the start of my next journey. It’s been a great ride and it’s not over yet!
I still write for accountants and tax advisers on this blog, on Linkedin and in the Magic of Success emails. And sometimes for other blogs and magazines. I produce fresh content every week. Some of those who read it get in touch for mentoring support and guidance.
And I have not fully left the world of tax as I remain Chairman of the Tax Advice Network, now also accessed via the FindATaxAdviser.online website.
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