The SRA has warned its members that they could find schemes that were previously deemed legitimate have been reassessed by HMRC and are no longer accepted.
According to the UK taxman, General Anti-Abuse Rule (GAAR) 2013 legislation was introduced to deal with situations where taxpayers use schemes “to achieve a favourable tax result that parliament did not anticipate when it introduced the tax rules in question and, critically, where that course of action cannot […] be regarded as reasonable”.
HMRC says it will take action against abusive tax avoidance schemes. It has also indicated it might challenge arrangements not caught by GAAR.
Figures released in August showed that the majority (86%) of litigation decisions in 2016/17, where tax avoidance was involved, were ruled in favour of HMRC.
Evidence of Misconduct
“The promotion or implementation of articial arrangements will lead both client and advisers into difficulties with HMRC and leave the adviser open to discilinary action,” the SRA warned.
The industry body states that “it is for HMRC and the relevant courts to decide on the legality of tax avoidance schemes”.
However, where solicitors have advised on schemes that are judged to be illegal, the SRA see this as evidence of misconduct.
Paul Philip, SRA chief executive, said: “Like the rule of law, tax underpins the effective running of our society and economy. Solicitors play an important role in helping tax payers meet their legal obligations. The government has been clear that the common assertion that tax avoidance is legal no longer applies.
“We are concerned that some solicitors are facilitating tax avoidance schemes aggressively in ways that go beyond the intentions of parliament.
Solicitors are in a position of trust, and it is essential that they act with integrity and uphold the rule of law. They should be giving competent tax advice that is in their client’s best interest.”
SRA principles
The SRA warning notice reminds solicitors of the principles they should uphold when advising clients on tax planning, such as upholding the rule of law and proper administration of justice, acting with integrity and acting in the client’s best interests.
They should also behave in a way that maintains public trust in solicitors.
