Background

On 19 March 2015, HM Treasury asked leading UK accountancy and tax bodies to review the existing Professional Conduct in Relation to Taxation (PCRT) with the aim of strengthening the guidance to play a key role in the setting of, and enforcing, clear professional standards in relation to facilitation and promotion of tax avoidance. In its paper Tackling tax evasion and avoidance, HM Treasury challenged “the regulatory bodies who police professional standards to take on a greater lead and responsibility in setting and enforcing clear professional standards around the facilitation and promotion of avoidance to protect the reputation of the tax and accountancy profession and to act for the greater public good”.

Following on from HM Treasury’s challenge, those professional bodies (which include CIOT, ATT, AAT, ACCA, ICAWE, ICAS and STEP) have now issued five new standards for tax planning which will take effect from 1 March 2017 under the revised PCRT guidelines.

Key Points

The guidance is based upon five fundamental principles:

  • integrity;
  • objectivity;
  • professional competence and due care;
  • confidentiality; and
  • professional behaviour.

These principles have resulted in five new standards for tax planning:

  • client specific;
  • lawful;
  • disclosure and transparency;
  • tax planning arrangements; and
  • professional judgment and appropriate documentation.

These standards have been agreed between HMRC and the above professional bodies. They aim to ensure that tax planning is specific to the client’s circumstances. Under the standards, advisers must act lawfully and with integrity and, in turn, they should expect the same from their clients. Any disclosure made to HMRC must be a fair representation of the relevant facts available at that time. The standards also make it clear that professionals should not aim for structures that are highly artificial or contrived, or promote tax planning arrangements that set out to achieve results that are contrary to the clear intentions of Parliament. Advisers should ensure that adequate contemporaneous notes are maintained of the rationale behind judgments made in adhering to the standards.

Stricter Regulatory Environment

The seven professional bodies acknowledge that PCRT has long set out professional and ethical standards which require more of their members than the letter of the law demands. The regulatory bodies believe these new standards for tax planning achieve an appropriate balance, making it clear to the small minority of tax professionals who continue to facilitate and promote tax avoidance schemes that this type of behaviour is not acceptable, while enabling the vast majority of advisers to continue undertaking responsible tax planning for their clients.

The new standards are a result of government pressure that professional bodies take a greater lead in setting and enforcing professional standards dealing with tax avoidance. The ICAEW and other industry organisations have so far instituted few if any disciplinary proceedings against their members for advising on aggressive tax avoidance schemes but that may well change as the professional bodies show that they are willing to back the PCRT with sanctions. Tax professionals overstepping the PCRT standards may find that they face disciplinary action from their professional body as well as financial penalties from HMRC.

There is no doubt that the revised guidelines represent a more stringent approach to the regulation of tax professionals, which will require greater care being taken by tax professionals when assisting clients in tax planning.