New avoidance enabler penalties 'too wide'

A chartered tax body has echoed an alert that advice on complicated and unclear areas of law, such as IR35, could be hit by proposals to penalise so-called ‘avoidance enablers.’

In fact, in line with the alert by WTT Consulting, the Chartered Institute of Taxation says “many reputable” firms may be deterred from advising on “complex matters” for fear they may be regarded as ‘enabling avoidance.’

But even more ubiquitous than guidance on IR35, “ordinary business services” such as company formation could also be caught by the proposed and “widely drawn” term, fears the institute.

“Because some avoidance schemes rely on setting up companies,” explained the CIOT, “[services] ranging from company formation to advice on highly complex legislation” could be within scope.

The CIOT’s John Cullinane says the proposal should be reworked so it targets the deliberate behaviour of the “small persistent minority” of advisers who devise and market schemes.

To do that, the term ‘enabler’ could be defined in terms of those advisers which “devise and play an active role in the promotion of tax avoidance schemes,” and who -- more strongly than proposed -- benefit financially.

And “there should be a defence for professional advisers who are members of a regulated body or a body with professional rules that address the issue of tax avoidance,” Mr Cullinane hopes.

Likely to garner even more support from non-members is the CIOT’s recommendation that the proposal should apply to enabling that takes place “only after the date that it comes into force,” so that it cannot catch advisers retrospectively.