A body has expressed serious concerns that measures in the upcoming Finance Bill could pose an “existential threat” to professional firms and cause significant harm to compliant taxpayers.
The Institute of Chartered Accountants in England and Wales (ICAEW) pointed out several effects the Bill has on tax advisers, including introducing a criminal offence for promoting tax arrangements that have “no reasonable prospect of success”.
Because it is “strict liability,” the ICAEW has warned that honest mistakes, such as overlooking a complex anti-avoidance provision or receiving inaccurate client info, could technically become criminal acts.
“Tax advice is complex and highly fact sensitive…..ICAEW believes that criminalising such conduct for the vast majority of tax agents would be disproportionate.”
The body pointed out that the mandatory registration for tax advisers, starting in May, requires all tax advisers interacting with HMRC to register. HMRC will have the power to refuse or suspend registration if a firm’s conduct “falls below standards.”
The body warned that the lack of a “proportionality test” could mean honest mistakes or historical errors lead to firm closures and the disruption of thousands of client relationships.
‘Brain drain’
ICAEW has warned that the penalty framework, including penalties of up to £1m, could lead to advisers withdrawing from higher-risk work, which the body stated would weaken, not strengthen, overall tax compliance in the UK.
The accountancy body is now lobbying MPs for changes, including limiting sanctions to unethical or unreasonable conduct only, ensuring that legitimate professional judgment is legally protected, and pushing back the implementation to 2027 at the earliest.
“ICAEW believes that the implementation should be delayed until 2027 at the earliest, with the measures subject to further consultation and a clear impact assessment.”
The body stated that it has already been “successful in convincing HMRC” to change the mandatory registration requirement from that proposed in the draft legislation published in July.