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By Ben Stupples
The U.K.’s Conservative Party is keeping quiet on plans for stricter rules on tax advisers to step up the fight against aggressive tax planning.
The plans were published in the party’s May 18 manifesto before next month’s general election. However, the party’s press office failed to respond to emails and telephone calls from Bloomberg BNA requesting further detail and comment on its promise for “ tougher regulations” on tax advisory firms.
The pledge 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.
With Prime Minister Theresa May leading the polls by as much as 20 points, the Conservatives are tipped to win the June 8 election, increasing the likelihood of the tougher regulations becoming law.
Amid the silence from the party, tax practitioners have suggested that the manifesto pledge may relate to legislation initially included in the 2017 Finance Bill—which targeted “enablers” of tax avoidance—that the government subsequently dropped because of the snap election’s timing.
The dropped measure introduced a “penalty for any person who enables the use of abusive tax avoidance arrangements, which are later defeated,” according to the finance bill’s explanatory notes. Enablers are “those who design, market or otherwise facilitate tax avoidance,” it added.
Anita Monteith, technical tax manager at the Institute of Chartered Accountants in England and Wales, told Bloomberg BNA in a May 18 email that the dropped legislation for tax abuse enablers “will be relatively easy to resurrect” if the Conservatives are re-elected “as it is already written.”
Jonathan Riley, Grant Thornton U.K.’s head of tax, told Bloomberg BNA in a May 18 email that the Conservatives must target the measure correctly if it in fact relates to the finance bill’s draft laws.
It needs to “penalise those who have enabled aggressive artificial tax avoidance, not those who advise their clients based on a reasonable interpretation of very complex tax laws,” he said.
The pledge for stricter rules comes as tax advisers already face tougher regulation.
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 accounting 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 revised guidelines, the Professional Conduct in Relation to Tax, followed the U.K. government’s call in March 2015 for professional tax and accounting regulators to take more responsibility with establishing and enforcing standards around the promotion of tax avoidance.
Expectations “in relation to tax planning have evolved significantly in recent years,” the statement said. “Fundamental professional obligations to act with integrity and uphold the reputation of the profession and of clients would not be met if our rules did not also change to recognize this.”
The updated code of conduct took effect from March 2017. It also pledged disciplinary action on any member among the seven U.K. regulatory bodies that breaks the outlined professional standards.
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