Government plans to impose heavy penalties on professionals who advise on tax avoidance schemes subsequently disallowed by HMRC could breach human rights law, a professional body warned today. 

In its submission to the consultation on an HMRC 'discussion document' entitled Strengthening Tax Avoidance Sanctions and Deterrents, the Chartered Institute of Taxation also says that new penalties on 'enablers' could threaten investment into the UK. It is particularly critical of the proposal to introduced 'tax-geared' fines, based on the sum of tax that a scheme sought to avoid. 'It is not clear from the consultation document why a penalty for "enabling tax avoidance" should be subject to different penalties than any other penalty.'

The effect might be to 'deter some from providing advice at all... and risk making the UK a much less attractive place for commercial transactions and other activities.'

Another point of concern is the proposal that the onus of proof should be on the taxpayer to demonstrate 'reasonable care' in ensuring the legality of schemes. 'This would be a significant change which in our view is not justified.'

On human rights, the response says that the 'disproportionate' scale of the proposed penalties could contravene the right to protection of property un der Article 1 of the first protocol to the European Convention on Human Rights. Meanwhile requiring an adviser to prove what advice they gave could also conflict with legal privilege, contravening Article 6 (right to fair trial) and Article 8 (right to private and family life) of the convention.

John Cullinane, tax policy director at the Chartered Institute of Taxation,  said: 'If the government wants to incentivise good behaviour and penalise bad, as we think it should, the proposals should target the deliberate behaviour of the small persistent minority who devise and market avoidance schemes. It should not interfere with the right of taxpayers to obtain full and rounded advice on complex and often unclear areas of law.

'It could be calamitous for businesses and other taxpayers if tax advisers (or their insurers) feel too anxious about the new sanctions to help them sensibly plan their tax affairs within the law and avoid these taxpayers laying themselves open to large, unintended tax bills.'