Clamping down on promoters of tax avoidance

[Image by Alexas_Fotos from Pixabay]

We posted yesterday about the consultation on notification of uncertain tax treatment by large businesses. Another consultation which closed yesterday, and to which we submitted a response, was about clamping down on promoters of tax avoidance. The proposed measures are robust and we welcome them, but they suffer from a fundamental defect, which is that they are civil in nature. We are of the view that if the criminal nature of the underlying abuses were being properly addressed using the criminal law, complex civil regimes would not be necessary.

The General Anti-Abuse Rule, which underpins much of the existing and proposed regulatory framework applying to rogue tax advisers, operates what is known as the “double-reasonableness” test. An affirmative application of this test means that a course of action is not merely unreasonable, but cannot reasonably be regarded as reasonable. Tax advice recommending such a course of action therefore falls outside the full range of positions within which an adviser acting in good faith might fall, whether advising conservatively or aggressively. In other words it places beyond reasonable doubt that the adviser was not giving honest advice at all. And if the adviser was not giving honest advice, then the offence of cheating the public revenue (or an inchoate version of that offence) was being committed. Complex civil regimes intended to constrain the harms caused by egregious tax avoidance and discourage those who promote it (such as those under consultation) would not be necessary if the criminal law applicable to these activities were being properly enforced. We go into this point in detail in our work on targeting the enablers of ineffective tax avoidance.