Controversial new penalties for 'enablers' of tax avoidance schemes deemed unlawful by HM Revenue and Customs will become law next year – but not be applied retrospectively, the Treasury said today. According to documents published alongside the draft Finance Bill implementing the autumn statement, the penalty for enablers 'will apply only to steps taken by enablers after Royal Assent to Finance Bill 2017'.
The possibility of retrospective penalties was one of several concerns raised by professional bodies including the Law Society in a consultation on the new penalties earlier this year. However the 'tax information and impact notes' for the Finance Bill 2017 published today say that 'the vast majority of professionals who provide clients with advice on genuine commercial arrangements will not be impacted.
The document also promises that the bill will provide clarification as to what is considered to constitute 'reasonable care' in relation to the seeking of professional advice.
Professional bodies welcomed the apparent softening in the government's line.
Law Society president Robert Bourns said he was 'cautiously encouraged by the way the government appears to have taken some of our views on board in the draft bill'. However 'there remain a number of complex areas where we will be seeking further reassurance.'
In particular, the Society will ask for more detail on the government’s proposed approach to protecting legal professional privilege and a more careful definition of 'enablers' to ensure professionals are properly protected when giving legitimate advice. 'We will continue to voice our objection to imposing penalties on solicitors who have advised their clients honestly and lawfully,' Bourns said.
John Cullinane, tax policy director at the Chartered Institute of Taxation, said that the government had taken on board professional concerns. 'The moves outlined in today’s draft legislation present a measured and balanced approach towards tackling those who enable tax avoidance while ensuring that the interests of the overwhelming majority of agents who provide genuine professional advice to their clients are protected.’
Other measures in the draft Finance Bill include one to ensure that legal support provided by employees or former employees called to give evidence at inquiries will be tax-free. Meanwhile, inheritance will be extended to UK residential properties which are held by non-domiciled individuals through overseas vehicles. The changes will take effect from 6 April 2017.
The Treasury said the final contents of the Finance Bill 2017 will be subject to confirmation in the spring budget.