The Public Accounts Committee has examined the role of the Big 4 and other accountancy practices in relation to the use of tax mitigation products, producing a Parliamentary report on their findings and recommendations.
Broadly, the report recommends that HMRC must:
- Be more robust in challenging advice being given by accountancy firms.
- Work closely with the CPS to increase the number of prosecutions.
- Work with the Government to set out how they will tackle tax avoidance more effectively, including by introducing new strict liability offences to penalise those involved in advising or helping companies and individuals avoid or evade tax.
- Introduce a new code of conduct for all tax advisers.
These recommendations have been prompted by, amongst other things, significant criticism of HMRC’s lack of progress in tackling tax evasion, including in the wake of the HSBC scandal out of which HMRC has made only one conviction since receiving the relevant data in 2010.
According to the report, the UK reputedly has the most complex tax code in the world which the committee believes creates greater opportunities for tax avoidance. The Report also calls for:
- Less complexity between what it describes as acceptable tax planning and ‘aggressive’ or ‘artificial’ tax avoidance.
- Greater consistency in approach to treatment of corporations where tax incentives are concerned.
This is the second time the committee has examined the role of large accountancy firms advising multinational companies on complex strategies and structures which the committee believes are designed to avoid tax. For some years now avoidance has been stigmatised in Parliament and in public, even though it may be entirely legitimate and properly explored by companies that already pay substantial amounts of tax which their directors do not seek to avoid. In this regard, the report does not seem to reflect on the responsibility of Parliament for providing byzantine tax legislation and for not having got to grips with the extent to which corporates and individuals can legitimately avoid tax. Without a more precise formulation as to what is aggressive avoidance, accountancy firms providing tax planning advice might be at a loss to know where they stand, but might at least be considering tax planning advice and strategies which will be ‘passive’ and less likely to offend new rules or legislation.
A full copy of the Parliamentary report can be found here:http://www.publications.parliament.uk/pa/cm201415/cmselect/cmpubacc/974/974.pdf.