Proposed heavy penalties for solicitors who advise on tax avoidance schemes later disallowed by HMRC could be in breach of at least three articles of the European Convention on Human Rights, the Law Society said today.
In its formal response to a consultation on the discussion document Strengthening Tax Avoidance Sanctions and Deterrents, Chancery Lane says the proposals fail to distinguish between abuse and legitimate advice. 'Overall the measures as put forward are likely to present a barrier to taxpayers in taking full and frank advice in relation to their tax matters.'
The proposed sanctions, which could include ’tax-geared’ penalties equivalent to the sums the disallowed scheme sought to avoid ’would clearly engage the Human Rights Act 1998’, the Society says. It notes that:
- Article 7 of the European convention says that a person cannot be found guilty of a crime which was not a crime when it was committed. 'We have grave doubts... that this provision could ever be satisfied', the response says, because of the time lag between advice given by the 'enabler' and a scheme subsequently being overturned.
- Article 6 of the convention's requirement for a presumption of innocence means that the burden of proof would have to be on HMRC. The consultation document implies the opposite, stating that the taxpayer or adviser would have to prove they took ‘reasonable care’. 'Putting the onus on the taxpayer or adviser to prove their innocence would place solicitors and their clients in an impossible position,' Society president Robert Bourns (pictured) said. 'A lawyer would not be able to defend themselves without the client’s consent to waive the protections of legal professional privilege. No client should feel pressured to do so, and no penalty regime should rely on an assumption that clients will waive privilege.'
- Article 1 of Protocol 1 requires a balance between the legitimate aims of the state and the rights of the individual. 'In our view, that requires any penalties imposed by these measures to be proportionate. Tax geared penalties are not proportionate in the context of penalties being imposed on others.
In a separate response, the Chartered Institute of Taxation yesterday highlighted a further human rights concern, that the proposals might contravene Article 8 on the right to a private and family life.
Law Society president Robert Bourns (pictured) said: 'Punishing solicitors for giving honest advice on complex legal questions only hampers their ability to give any advice in the first place, increasing the risk taxpayers may unwittingly enter into unacceptable tax avoidance schemes. This is the very opposite of what we understand HMRC is trying to achieve.
'We would encourage government to focus on improving the clarity of tax rules to avoid ambiguities about their validity, rather than prosecuting lawyers who have advised honestly and diligently in their clients’ interests.'