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By Ben Stupples
The U.K.’s Conservative Party has said it plans to impose “tougher regulations” on tax advisory firms, pledging to step up the fight against aggressive tax planning before next month’s general election.
In its manifesto for the June 8 election, the party said it will “go further” in targeting tax evasion and avoidance and “will legislate for tougher regulation of tax advisory firms” in the U.K.
The party will “take a more proactive approach to transparency and misuse of trusts,” it added.
Led by Prime Minister Theresa May, the party’s announcement comes as Her Majesty’s Revenue and Customs, the U.K.’s tax authority, aims to raise an additional 5 billion pounds ($6.5 billion) a year by 2020 through tackling abusive tax arrangements, aggressive planning, and tax system imbalances.
John Cullinane, policy director of the U.K.’s Chartered Institute of Taxation (CIOT), said the proposal may relate to a measure initially included in the 2017 Finance Bill—which targeted “enablers” of tax avoidance—that the government subsequently dropped due to the snap election’s timing.
Imposing a 100 percent fine of the unpaid tax in question on professionals who have advised on avoidance schemes, this measure was “already expected to reappear” after the election, he told Bloomberg BNA in a May 18 email. If the proposal “is anything else, we have no details of it.”
George Bull, a London-based senior tax partner at accounting firm RSM, said the Conservative Party’s proposed crackdown on advisory firms may apply to tax professionals working “outside traditional regulatory bodies,” such as CIOT or the Institute of Chartered Accountants in England and Wales.
The party “clearly have something up their sleeve,” he told Bloomberg BNA in a May 18 telephone interview. “HMRC doesn’t want to duplicate the regulatory bodies that already exist, but there may be questions on whether unregulated professionals ought to be brought within a regulatory regime.”
In November 2016, the U.K.’s tax advisers received a warning against encouraging or engaging with tax avoidance schemes under new guidelines from the country’s top tax and accountancy bodies.
Tax advisers must not create, encourage or promote tax strategies that achieve results contrary to the intention of U.K. tax laws or seek to exploit loopholes within existing legislation, the U.K.’s seven leading tax and accounting bodies said in a Nov. 1 statement on the updated tax adviser code.
The Conservative Party’s stance in its manifesto on transparency and trusts, meanwhile, follows scrutiny of the U.K.’s commitment towards global efforts against offshore financial disclosures. It also echoes its rival Labour Party’s calls for minimum transparency requirements in tax havens.
In April 2016, the U.K. became the first country to introduce a public beneficial ownership register, forcing company owners to provide details such as their name, date of birth and nationality.
However, while it applies to U.K. companies, the public register omits Britain’s crown dependencies and overseas territories, including the British Virgin Islands, Jersey, and the Cayman Islands.
Earlier this year, U.K. lawmakers rejected an amendment that would have introduced public a beneficial ownership register for companies in the crown dependencies, namely Jersey and Guernsey.
In the past, the U.K. has successfully lobbied against the European Union’s efforts on public trust registers. The stance is based on the way trusts are used for “purely private purposes” far more in the U.K. than in Europe, according to the U.K.’s Society of Trust and Estate Practitioners, or STEP.
Nearly half of the companies listed in last year’s Panama Papers data leak were registered in the British Virgin Islands. The data leak of more than 11 million documents from Panama law firm Mossack Fonseca & Co. also identified nearly 2,000 U.K.-based intermediaries—such as accountants, lawyers and tax advisers—who helped facilitate individuals or entities with tax evasion or avoidance.
The U.K.'s top four tax and accounting advisory firms—PwC, EY, KPMG and Deloitte—declined to comment on the Conservative manifesto.
The party’s press office didn’t respond to a phone call and two emails requesting comment.
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