Why accountants are not the enemy of the taxman

A spate of high profile tax avoidance stories have made tax advisers out as the enemy of the taxman. Yet most are fair-minded and actually help the Revenue in its work, argues Kevin Reed

It’s always been a difficult call at parties. Do you describe yourself as an accountant? Or something else? Business adviser? Astronaut? But at the moment there is another job description that makes accountant seem positively attractive: tax adviser.

You can almost hear the response across the canapes: ‘So you help rich and famous people avoid paying their way?’ Cue embarrassed exit. I’ve certainly received a glare or two in the past when describing a tax adviser as an accountant. But if you were to ask George Osborne or David Cameron, then you are just accountants – helping the rich and famous avoid tax. It’s a shame that the accounting and tax professions have been dragged into political point-scoring.

What has changed?

It’s hard to pinpoint where it all began. However, several tax schemes, legal but highly aggressive, seemed to push the Gordon Brown-run Treasury over the edge in the early 2000s.

In an attempt to curb the schemes that danced around and through poorly drafted tax legislation, the tax-avoidance disclosure regime was introduced. This means tax advisers must declare tax schemes to the authorities, which has discouraged many firms from promoting such schemes to their clients.

There has also been a calculated attempt by the government to conflate the terms ‘avoidance’ and ‘evasion’ in public discourse.

Oh, and you may have noticed that we are in a long-running recession. A climate in which average earners are told that high earners can skip around their tax bills has seen tax avoidance reach the pages of the national newspapers, full of outrage and indignation.

Is this ‘fairness’ stuff actually fair?

For some the answer is a clear yes, but others are more doubtful. Some advisers consider the most important aspect of tax-avoidance schemes to be that they are legal. If they are legal, they argue, what’s the problem? If the government doesn’t like the way someone’s tax planning has been structured, then they can simply change the rules to block it.

But there is growing, vocal opposition to tax avoidance, with some even suggesting that as the rules get changed to block the most egregious schemes then effectively they were ‘illegal’ in the first place.

There are those in between, including many in the tax community, who see various shades of grey between the black and white. Where is the distinction between a scheme that goes beyond the pale, and one that would meet with the government’s approval?

Some tax advisers argue that they are ethically bound to provide clients with the options, and it’s up to clients to decide where they want to draw the line.

These issues have certainly been passionately discussed among tax advisers, particularly after the ICAEW’s chief executive, Michael Izza, spoke out to suggest that promoting aggressive avoidance schemes could bring the profession into disrepute.

But let us not forget that a resource-constrained HMRC effectively relies on advisers to do their business for them. Without an adviser community it’s fair to say that the tax take would severely diminish. For what it’s worth, I think that the vast majority of tax advisers have a good idea about where the boundaries lie between tax structures that are unlikely to be challenged, and those that would.

Whether they are duty-bound to open all the options to clients, or ethically bound to steer them clear, is much more a matter of opinion.

They would probably like the Treasury and HMRC to appreciate the work that they do, and perhaps collaborate better, so that problems are avoided and the profession is not tarred with the same brush as those pushing the boundaries of, well, decency.

As Chris Jones, a director at Tolley, said so succinctly: ‘Tax advisers are part of the solution. They should not be viewed as the problem.’

Kevin Reed is editor of Accountancy Age

This article first appeared in the November/December 2012 issue of Accounting Technician, AAT‘s membership magazine.

Kevin Reed is the former Editor of Accountancy Age.