Proposals for tougher penalties against serial users of disallowed tax avoidance schemes are premature and could threaten fundamental rights such as that of appeal, the Law Society has said. 

In a hard-hitting response to a consultation on strengthening sanctions for tax avoidance, the Society’s tax law committee says it has ‘fundamental misgivings’ about HMRC’s proposals to introduce new penalties for ‘serial users of tax avoidance schemes’ and those whose planning is counteracted by the general anti-abuse rule (GAAR).

In particular it condemns proposals to restrict tax reliefs to taxpayers with a history of abusing a relief. The response says the Society would ‘strongly resist’ any move to deny unconnected reliefs to serial investors in film schemes, for example.

The Society also has ‘concerns’ about what it calls the government’s suggestion that reliance on professional advice may be insufficient to protect a taxpayer from a penalty under the GAAR.

‘Taking appropriate professional advice should exonerate a taxpayer from carelessness or deliberate behaviour penalties.’ It says that HMRC’s proposal would ‘drive a coach and horses through the principle that an individual’s behaviour should be dealt with on a case-by-case basis’. 

Accusing the government of consulting in bad faith, the response says the committee is ‘extremely concerned’ by the short time available for responses. With announcements on this subject expected in Wednesday’s budget, ‘this suggests little or no credence will be paid to responses to this consultation’. 

Tax committee chair Gary Richards said: ‘The government's proposals are premature. HMRC’s legislation on follower notices and accelerated payments has only recently been introduced. If these measures meet their objectives, and it is too early to assess this, HMRC’s latest proposals on serial users will be unnecessary.

‘We are concerned that HMRC is not using its existing powers to litigate, instead wasting resources by attempting to introduce new legislation at a time when the deterrent effect of the general anti-abuse rule has yet to be established.’