Proposals to crack down on tax avoidance were announced by the Treasury yesterday.
The HMRC consultation stated enablers of tax avoidance could have to pay a fine of up to 100 per cent of the tax the scheme’s user underpaid.
The Treasury listed “accountants, tax planners and advisers” in its announcement regarding who might be hit with the tougher penalties.
Currently tax avoiders face significant financial costs when HMRC defeats them in court. However, those who advised on, or facilitated, the avoidance bear little risk, officials stated.
Tom Wesel, partner at tax consultancy firm Milestone International, said: "Given how uncertain tax law is, this is not a fair basis on which to punish tax advisors or other associated professionals. As it stands, the current proposals are one-sided, ludicrously draconian, and need to be revised."
He said HMRC's frustration is understandable and believes it is looking for a way to “make a charge on those pedalling dodgy tax planning schemes to a mass market”.
He said: “However, there is no requirement for tax advisors to have negligently or knowingly failed to point out the tax risks to their clients. Instead, their livelihood is put at risk for doing their job.”
Nigel Green, CEO and founder of deVere Group, attacked the “ill-conceived” proposals.
He said: “Whilst we support efforts to tackle the serious issue of tax evasion, it is paramount that more work is done before a fining system is implemented. The idea that it will be punishable to be an ‘enabler of tax avoidance’ when tax avoidance is legal is surely ill conceived.
He said: “Of course, we champion the idea of cracking down on illegal tax evasion and prosecuting those involved in tax evasion. Tackling it head on would be beneficial to the country’s coffers, to clients as often those dodgy schemes don’t work, and also to the financial services profession’s reputation.
“However, before a policy of fining advisers is rolled out, there would need to be clearer distinctions made from the authorities between tax avoidance, which is perfectly legal and can form a sensible part of a robust tax planning strategy, and tax evasion, which is illegal and therefore punishable under the law.”
He added: “All grey areas need to be removed and illegal loopholes closed so that everyone knows where they stand.”
Responding to these criticisms, HMRC told FP Today in a statement: "The majority of advisers and agents operate within the spirit of the tax law and do not enable tax avoidance which is defeated by HMRC.
"The consultation seeks comments on the detail of how to define the target population of enablers and what appropriate safeguards should be included to exclude those who are not enabling tax avoidance."
The Government said it is acting to make sure that tax avoidance is “rooted out at source and this action will target all those in the supply chain of tax avoidance arrangements”.
Jane Ellison, The Financial Secretary to the Treasury, said: “People who peddle tax avoidance schemes deny the country of vital tax revenue and this government is determined to make sure they pay.
“The vast majority of their schemes don’t work and can land their users in court facing large tax bills and other costs.
“These tough new sanctions will make would-be enablers think twice and in turn reduce the number of schemes on the market.”