The Institute of Chartered Accountants in England and Wales (ICAEW) has issued a helpsheet for its members on dangers of getting involved in aggressive tax avoidance schemes.

The move follows a proposal by the government to do more to tackle abusive tax avoidance and comments by ICAEW CEO Michael Izza in his blog, where he responded to coverage in the Times of the avoidance antics of well known celebrities.

The ICAEW says “If you don’t understand or can’t explain the scheme, it’s highly unlikely that your client will have understood it; this raises the question whether you properly advised your client…You should therefore exercise considerable caution before you recommend a client to enter into aggressive tax avoidance schemes promoted by third parties”.

The institute points out that tax schemes such as the capital loss scheme in Schofield v HMRC  simply don’t work, whilst reminding members of their ethics in relation to tax and HMRC’s spotlights it also points out the advisers may be liable to damages for the excess taxes a client pays when a scheme fails. 

Editorial comment

Michael Izza clearly upset a number of ICAEW members judging by some of the responses to his comments. However, he is sharing the view of the Treasury that something should be done to combat the problem left by what David Gauke calls tax cowboys. Advisers cannot fail to observe that HMRC has thus far been only partially successful in blocking some of the capital loss and employee remuneration schemes which have reached the Tribunals. New Disguised Remuneration legislation in Part 7A of ITEPA 2003 has put a damper on EBTs loans, however, the ICAEW may be concerned that there is a legacy of thousands of taxpayers who have taken advantage of HMRC's intransigence over EBTs in the past fifteen years who are now looking for schemes to write off their EBT loans. 

All is not exactly over for EBTs either, in-boxes indicate that the latest generation of schemes are reverting back to adapting use as employee share ownership trusts to obtain a corporation tax relief and then via [undisclosed middle section] allowing a tax free cash bonus to staff [e.g. directors].

Links: ICAEW helpsheet