The body regulating Solicitors in England & Wales has just issued an extraordinarily stern warning to those who provide advice to clients wishing to avoid tax contrary to the intentions of Parliament using arrangements which ultimately fail.
The SRA’s warning includes the following:
“To be involved in such arrangements…will leave [you] open to the risk of disciplinary proceedings as well as committing a criminal offence…Where schemes are defeated and solicitors have advised on the efficacy of such schemes, we will investigate this as evidence of misconduct…”
(See the full statement here)
The reference to the risk of a Solicitor committing a criminal offence has caused something of a stir. It appears to go beyond the warning issued jointly by the leading accountancy and tax advisory bodies earlier this year which includes a less draconian but nevertheless stern warning that:
“…Such behaviours would lay a member of one of the bodies open to disciplinary action.”
(See the CIOT’s press release here)
It is not entirely clear what lays behind the SRA’s reference to criminal behaviour. Although often conflated in public discourse, a distinction would normally be drawn between tax avoidance arrangements that are found to be ineffective (since the law does not apply to the facts in the way intended by the taxpayer, even if approved by a legal advisor in this context) and criminal tax evasion, which generally requires evidence of deception and dishonesty.
The SRA’s warning may be seen as resonating with the new statutory criminal offence (effective 1 October) of failing to prevent the facilitation of tax evasion (‘Corporate Criminal Offence’, ‘CCO’). These new rules are of particular relevance to professional advisory firms and the only defence against a conviction and unlimited fine would be to show that reasonable prevention procedures are in place – so the new rules require quite urgent action on the part of professional advisory firms.
Whatever lays behind the SRA’s particular choice of words, it does seem very clear that every possible lever is being pulled in the fight against unacceptable tax avoidance and evasion.
We are able to help any business, including professional advisory firms, deal with the new CCO regulations and any related issues arising. Please contact us if you would like to discuss how we can help you.