Print this article

HMRC Seeks To Reassure Advisors On New Avoidance Penalties

Amisha Mehta

22 August 2016

has said there is “no way” advisors engaging in legitimate tax planning will be punished under the new avoidance measures it has proposed.

Last week, HMRC announced plans for tougher penalties for “enablers”, including financial advisors, lawyers and accountants, in the form of a fine of up to 100 per cent of the tax that was avoided.

The proposal has led to concerns that legitimate advisors will be targeted given the grey area that comes with tax law. For example, Andrew Watters, tax partner at Irwin Mitchell Private Wealth, said the real challenge will be defining exactly what type of avoidance would trigger these penalties. Tom Wesel, partner at tax consultancy Milestone International, said advisors' livelihoods would be put at risk for doing their job.

In an attempt to dispel concerns, a spokesperson for HMRC said in an emailed statement: “Tax avoidance is not the same as tax planning. Tax planning involves using tax reliefs for the purpose for which they were intended. For example, claiming tax relief on capital investment, saving in a tax-exempt ISA or saving for retirement by making contributions to a pension scheme are all legitimate forms of tax planning.

“While such actions may reduce the total amount of tax paid, they are not tax avoidance, because they involve using tax reliefs in the way that parliament intended when it passed the relevant legislation,” the spokesperson said. 

The spokesperson added that under the new rules, it would be a court, tribunal or mutual agreement that would deem a scheme as avoidance before HMRC starts issuing penalties against a promoter of such schemes.