Regulators have expressed their concerns that some solicitors may still be running the risk of a knock on the door from the taxman. The Solicitors Regulation Authority today issued a warning notice referring to HM Revenue & Customs legislation which has altered the definition of what tax planning advice is legitimate and acceptable.
Investigators now want to be satisfied schemes can be ‘regarded as reasonable’ and tax avoidance schemes in particular will come under closer scrutiny.
The SRA fears revised general anti-abuse rules could catch out solicitors who were previously deemed to have been acting legally and may still be working under that assumption.
‘The government has been clear that the common assertion that tax avoidance is legal no longer applies,’ said SRA chief executive Paul Philip. ‘We are concerned that some solicitors are facilitating tax avoidance schemes aggressively in ways that go beyond the intentions of parliament. Solicitors are in a position of trust, and it is essential that they act with integrity and uphold the rule of law.’
The SRA says if the court or tax authorities judge advice to be illegal, that will be taken as evidence of misconduct. The regulator has also vowed to take action if there is evidence of a lack of integrity in a solicitor’s dealings with HMRC, either directly or on behalf of clients.
HMRC has explained that new rules come into operation ‘when the course of action taken by the taxpayer aims to achieve a favourable tax result that parliament did not anticipate’.
The government has also legislated for other anti-avoidance reform including ‘follower notices’ and ‘accelerated payments’ and intends to bring in a new penalty that can be applied to professionals who enable tax avoidance which HMRC later defeats.
In the warning notice, solicitors are reminded of the principles around upholding the rule of law and the proper administration of justice, while also acting in the best interests of each client.
When a client’s instructions place the solicitor at risk of non-compliance, they are advised to terminate the retainer unless those instructions change.