A consultation published today by HM Revenue & Customs has proposed that advisers – including banks, accountants and lawyers – should potentially have to pay fines equivalent to up to 100 per cent of the underpaid tax if the schemes they help design for clients are defeated in court. The move would significantly increase the risk for lawyers who help clients avoid tax by exploiting legal loopholes. ‘People have been focusing on the banking sector for implications in tax avoidance until now, but the focus is switching to law firms and accountants,’ one senior tax lawyer told The Lawyer. The consultation is open for comments until 12 October, after which HMRC will begin developing a framework for tax avoidance sanctions.
Blurred lines
Several City partners have been quick to voice concerns about how such a penalty would function in practice, given the fine divide between legitimate tax planning advice and facilitating tax avoidance. ‘It’s going to be a difficult job to find where the dividing line is,’ one City partner told Legal Week. Osborne Clarke private client partner Andrew Goodman added that such sanctions would likely intrude upon the independence of legal advisers, forcing them to skew the advice they give to clients in light of risks for themselves and their firms. Lawyers would need to tell clients: ‘There’re other things you could do but I can’t advise you because it’s too risky,’ he told Legal Week.
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