MPs target enablers of tax avoidance schemes

A cross-party group of MPs is calling for an overhaul of sanctions for advisers who promote ‘unlawful’ tax avoidance schemes. The Committee on Anti-corruption and Responsible Tax, led by Dame Margaret Hodge, seeks to strengthen both the common law offence of cheating the public revenue and the penalties for enablers of defeated tax avoidance schemes provisions.

In a policy paper, published in association with Kings College, Hodge notes: ‘We are not trying to start a witch hunt against honest advisers that make a mistake. We’re not simply pursuing all those that breach the codes of conduct for a professional regulatory body. We’re looking at the very worst end of the tax advice spectrum. The enablers of these failed tax avoidance schemes are breaking the law, plain and simple. It is this criminality that we aim to address.’

The report proposes using the GAAR test (where it would not be reasonable to consider that the scheme in question was reasonable) to establish dishonesty in relation to the offence of cheating the public revenue, meaning HMRC would not need to prove dishonesty separately where the GAAR test has been met. The report also suggests that the scope of the penalties for enablers regime should be expanded to cover ‘any case of defeated tax avoidance where the scheme was, at implementation, more likely than not to fail’ with accompanying ‘toughened up’ penalties for the enablers.