FCSA welcome the Government’s efforts to close in on Promoters of marketed tax avoidance schemes.
However, we must ensure that any new powers HMRC receive are fit for purpose, and that there are sufficient checks and balances in place. Proportionate safeguards are vital to prevent unfair expense and reputational damage to compliant firms and individuals who have been incorrectly suspected of non-compliance.
However, we are clear that the balance is not yet in the right place and non-compliant firms are, in many cases, able to evade accountability. FCSA support the Government’s intention to address this and the feedback we provide is in that vein.
A key safeguard we recommend would be to ensure that two separate individuals from separate teams are able to review a prospective case for investigation and come to the same conclusion independently of one another. It is important that an investigation does not get senior sign-off without passing this ‘two sets of eyes’ test.
The ‘two sets of eyes’ test will not only help to prevent unfair costs and reputational damage for firms but it will also help to ensure HMRC’s investigations are well founded and significantly increase the chance of conviction. Without this safeguard, there is a risk of tunnel vision and over interpretation of rules leading to investigations that are not well founded, ultimately wasting everyone’s time – including HMRC’s.
FCSA believe it is important to ensure that the scope of these proposals is sufficiently broad but also well defined. By that we mean the powers should be limited to clear legal breaches and not stray into areas where an opinion, or interpretation of the law may be necessary. There are currently too many ‘grey areas’ and instances where dispensations set the wrong precedent – these need to be addressed to give legal clarity to aide enforcement and prosecutions.
It is also important to ensure that all culpable parties fall within the scope of both civil penalties and criminal sanctions. This means following the evidence throughout the supply chain and not being delayed by nefarious injunctions.
A careful balance for publication of sanctions also needs to be struck. There are two purposes to this:
a) to deter and punish the most flagrant breaches
b) to educate and inform those that wish to enhance their compliance
Limiting publications to 1 year in the public domain doesn’t work. The default needs to follow accountancy publications i.e. six years + the current year.
It is vital to consider the firm/individual’s intentions when publishing – minor instances, particularly first offences, anonymity is fair and reasonable. Such publications should be detailed case studies to allow them to act as educational pieces. The policy aim must be to enhance compliance across the board – Education is fundamental to that.
