Solicitor tax work facing greater scrutiny
Solicitors providing tax planning services could face greater scrutiny from both HM Revenue & Customs (HMRC) and the Solicitors Regulation Authority (SRA), as the Government looks to clamp down on "aggressive" tax avoidance schemes.
The warning comes from the SRA, which has published a notice outlining concerns around tax work. Solicitors could find that schemes previously deemed legitimate are reassessed by HMRC and are no longer accepted.
According to HMRC, General Anti-Abuse Rule (GAAR) 2013 legislation was introduced to deal with situations where taxpayers use schemes "to achieve a favourable tax result that Parliament did not anticipate when it introduced the tax rules in question and, critically, where that course of action cannot...be regarded as reasonable.” HMRC says it will take action against abusive tax avoidance schemes. It has also indicated it might challenge arrangements not caught by GAAR.
It is for HMRC and the relevant courts to decide on the legality of tax avoidance schemes. Where solicitors have advised on schemes that are judged to be illegal, the SRA will on the face of it see this as evidence of misconduct. It will also take action if it sees evidence of a lack of integrity in a solicitor’s dealings with HMRC, either directly or on behalf of clients.
The SRA has already taken action against solicitors who have involved themselves in schemes to avoid the payment of stamp duty land tax.
Paul Philip, SRA Chief Executive, said: “Like the rule of law, tax underpins the effective running of our society and economy. Solicitors play an important role in helping tax payers meet their legal obligations. The Government has been clear that the common assertion that tax avoidance is legal no longer applies.
“We are concerned that some solicitors are facilitating tax avoidance schemes aggressively in ways that go beyond the intentions of Parliament. Solicitors are in a position of trust, and it is essential that they act with integrity and uphold the rule of law. They should be giving competent tax advice that is in their client’s best interest.”
The SRA's warning notice reminds solicitors of the principles they should uphold when advising clients on tax planning, such as upholding the rule of law and proper administration of justice, acting with integrity and acting in the client's best interests. They should also behave in a way that maintains public trust in the solicitors.
The warning notice can be found here: www.sra.org.uk/solicitors/code-of-conduct/guidance/warning-notices/Tax-avoidance---your-duties--Warning-notice.page