(Guidance on reporting unacceptable tax planning and tax evasion)
Introduction
As ATT members you may come across firms or individuals where you have concerns that the advice being provided amounts to unacceptable tax planning or evasion. Further, you may have clients who have been approached by, or recommended to, such firms or arrangements.
This note gives guidance on what to do where you come across other firms you suspect are creating, encouraging, or promoting unacceptable arrangements, and starts by reminding you of the requirements of members in relation to tax planning advice you may be providing.
Tax Planning Standards for members
All members are reminded of the requirement to adhere to Professional Conduct in Relation to Taxation (PCRT) and in particular to the standards for tax planning:
Help Sheet A reminds ATT members that they “should take care not to be associated with the presentation of facts they know or believe to be incorrect or misleading, and not to assert tax positions in a tax filing which they consider to have no sustainable basis.” (PCRT Help sheet A: Submission of tax information and Tax filings paragraph 12). You must take care to ensure that you do not include details on a client’s tax return where you consider there is no sustainable basis to any tax planning arrangements entered into by your client (whether or not you were the tax adviser setting up those arrangements).
Help Sheet B contains a number of Standards for Tax Planning. Members’ attention is particularly drawn to the section on “Tax Planning Arrangements” and the requirement that members must not create, encourage or promote tax planning arrangements or structures that (i) set out to achieve results that are contrary to the clear intention of Parliament in enacting relevant legislation and/or (ii) are highly artificial or highly contrived and seek to exploit shortcomings within the relevant legislation.
HMRC has adopted similar requirements in their HMRC standard for agents, therefore these standards apply both to members of professional bodies, and unaffiliated agents. https://www.gov.uk/government/publications/hmrc-the-standard-for-agents
HMRC may refer any ATT members they come across whom they suspect are involved in tax avoidance schemes or the promotion or enabling of those schemes to the Taxation Disciplinary Board (TDB). Similarly, if the ATT becomes aware of members who are breaching the tax planning standards then the matter will be referred to the TDB for investigation, which could lead to disciplinary action.
You should be aware of the Current list of named tax avoidance schemes, promoters, enablers and suppliers and HMRC’s Spotlights, and should warn clients about the risks of getting involved with any of these. These are not definitive lists and you should think twice about circumstances which look similar and consider reporting them (see below).
Employees who are concerned that they or others within their firm are being asked to take an approach which is contrary to the principles set out in PCRT should consult their firm’s internal procedures and also refer to:
Specialist advice
One of the fundamental principles of PCRT is professional competence and due care. Members must not undertake professional work which they are not competent to perform unless they obtain appropriate assistance from a suitably qualified specialist. Such work may involve opining on or including in returns matters involving tax planning, or assisting clients who have entered into avoidance schemes to resolve HMRC’s enquiries or regularise their tax affairs.
You can use our online directory to find members who may be willing to provide specialist support on matters which are outside your expertise.
In such situations please alert your client to your lack of specialist expertise so that they have the opportunity to get timely specialist advice.
Tax Evasion - AML Reporting Requirements
Tax evasion is illegal and if a member suspects this has taken place (for example, you see returns with deliberately incorrect statements or deliberately omitted income) then they must make a report to their firm’s Money Laundering Reporting Officer (if they work within the regulated sector) or if they are a sole practitioner they need to consider whether a suspicious activity report (SAR) is required. Making a SAR overrides client confidentiality considerations and you should not tell a client that a report has been made. Members should approach their MLRO for further advice. If supervised by the ATT then you can contact [email protected] for further guidance. If supervised by another professional body supervisor, then contact the relevant supervisor for support. Some arrangements initially appear to involve planning or avoidance but, on closer inspection, you may suspect fraud or evasion, so you must report these situations.
Reporting Unacceptable Tax Avoidance Schemes, promoters, enablers and suppliers who are ATT members
At present there are no legal or professional requirements for members of the public to notify HMRC (or other parties) about tax avoidance schemes (although advisers and clients do need to be aware of Disclosure of Tax Avoidance Scheme and Mandatory Disclosure Rules requirements). There are similarly no requirements for members to notify the ATT where you identify another member who has potentially breached PCRT (for example, through the promotion of a tax avoidance scheme which you believe breaches the Standards for Tax Planning).
However, you should consider your own position carefully to ensure that you will not inadvertently become associated with the particular scheme or arrangements and consider, as is likely, whether your contractual obligations to your clients includes an obligation to act in the best interests of the client. If you are aware that a client is engaged with or considering such a scheme or arrangement promoted by others, then it is very likely that you should be warning the client in that regard.
Subject to the need to preserve confidentiality (see below), we would also encourage you to consider one or more of the actions below, including:
- Make a complaint directly to the TDB.
- Consider whether to report details of the scheme directly to HMRC. This might include references to inappropriate tax advice as shown on another firm’s website. HMRC have advised us that the best way to do this is to use the form included on: https://www.gov.uk/report-tax-fraud. Whilst the page refers to tax fraud HMRC have confirmed that the link on this page is also the one to use for reporting suspected tax avoidance.
- If you would find it helpful, and you wish to remain anonymous as far as HMRC are concerned, you could notify the CIOT/ATT Head of Professional Standards who will then liaise directly with HMRC. The Head of Professional Standards can be contacted by emailing mailto:[email protected]
The TDB or the Head of Professional Standards will need sufficient detail of the breach and of the alleged tax avoidance (or other potential breaches of PCRT) to take matters forward but will be able to discuss with you what this might require in a particular case. Individuals should not seek to investigate the issue or put themselves in breach of their professional obligations to obtain further information. This does not preclude members dealing with enquiries and supporting clients to exit from arrangements or from seeking information and considering the behaviour of their client and any firm acting on their behalf, where this is relevant to their work.
Members are also reminded of the requirement to keep their client’s affairs confidential and to act in the best interests of the client (subject to the SARs exemption referred to above) and should not include details specific to a particular client without their express agreement.
Investigation of potential breaches of PCRT is undertaken by the TDB or may be investigated by HMRC. The ATT do not investigate tax avoidance schemes.
Reporting Tax Avoidance Schemes, promoters, enablers and suppliers who are NOT ATT members
Other Professional bodies
Other author bodies of PCRT or bodies adhering to PCRT have similar complaints processes to the ATT and if the individual or firm breaching PCRT belongs to one of the other bodies you should consult the relevant body’s website for details of their complaints procedure. If you have difficulty in finding the details email the CIOT/ATT Head of Professional Standards who will be happy to assist.
You should also consider whether to report details of the scheme directly to HMRC. This might include references to inappropriate tax advice as shown on another firm’s website. HMRC have advised us that the best way to do this is to use the form included on https://www.gov.uk/report-tax-fraud.
If you are unclear what action to take and would find it helpful you can report the matter to the CIOT/ATT Head of Professional Standards by emailing [email protected]. The Head of Professional Standards will then make enquiries as to the most appropriate person or body to which to pass on the information.
Unaffiliated agents
Further advice on actions to be taken in relation to unaffiliated agents is set out in FAQ 13 of PCRT Help sheet B: Tax Advice
“FAQ 13. What is the position if the adviser responsible for the planning in FAQ 12 above is not a member of a professional body?
HMRC has issued its Standards for agents https://www.gov.uk/government/publications/hmrc-the-standard-for-agents and if an adviser has breached those you could consider reporting them to HMRC https://www.gov.uk/report-tax-fraud. You would need to take care not to breach client confidentiality and report only the nature of the planning and not the client’s name. You would need to take care not to breach client confidentiality and report only the nature of the planning and not the client’s name.”
In addition, if it would be helpful, you can report the matter to the CIOT/ATT Head of Professional Standards by emailing [email protected]. The Head of Professional Standards will then pass the relevant details to HMRC.