UK government consultation proposes stronger penalties for tax avoidance facilitators

New UK government proposals could see professionals including lawyers, accountants and consultants who provide advice on tax avoidance facing substantial penalties if they are found to have acted illegally.

A new consultation document published today provides that tax advisers whose avoidance schemes are defeated in court could be fined up to 100 per cent of the money lost to the taxpayer.

The news comes in the wake of Prime Minister Theresa May’s pledge to take a tough stance on corporate tax avoidance.

Deloitte, PricewaterhouseCoopers, Ernst & Young and KPMG, as well as some tax lawyers, have been accused of helping corporate clients to exploit complicated schemes by the House of Commons Public Accounts Committee (PAC).

While avoiders themselves incur significant costs if they lose to HM Revenue & Customs (HMRC) in court, their advisers face no such risks.

This month HMRC defeated a scheme used by the brewer Greene King – Project Sussex – marketed by Ernst & Young.

Dame Margaret Hodge MP, a former PAC chair, welcomed the news. She said: “If this new measure stops this dodgy tax advice it should end much of the aggressive tax avoidance.

“Time will tell whether this measure is tough enough to deal with the long established habits of advisers who act with lawyers, accountants or bankers and help rich individuals and large companies avoid tax.”

Alex Cobham, research director of the Tax Justice Network, a pressure group, said the proposals would require to be enforced in the courts by HMRC.

He said: “The proposal to go after enablers of schemes that have been successfully challenged will have no impact on this major area of tax losses, unless the government is finally willing to take on multinationals and the big four accountancy firms in court.”

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John Cullinane, tax policy director at the Chartered Institute of Taxation, remarked: “The government needs to be careful that in their efforts to wipe out avoidance schemes they don’t prevent taxpayers from getting access to honest, impartial advice on the law. Definitions will be crucial.”