Tough new sanctions for “tax-evading” solicitors

11 January, 2017

New sanctions introduced at the beginning of January will see solicitors incur fines for ‘enabling’ offshore tax evasion.

Following changes which took effect on New Year’s Day, the Government is now able to fine either individuals or entire firms who take deliberate action to help others evade paying tax.

Offenders will face fines of up to 100 per cent of the tax that they helped their clients to evade, or £3,000 – whichever is highest.

HM Revenue & Customs (HMRC) will also be allowed to publicly ‘name and shame’ the enabler. The law is the first of its kind to charge civil penalties on the facilitators of tax evasion.

According to Treasury consultation papers, the regime captures those who deliberately enable avoidance, distinguishing them from those who simply provide second opinion advice to clients on arrangements designed or enabled by others, and those who recommend against such arrangements.

Fines will only be issued for advice provided from 1 January 2017.

Later this year, the Government is also expected to introduce a new corporate criminal offence for firms found to have failed to prevent the facilitation of tax evasion.

Contrary to previous laws, where it would have to be proven that directors had direct involvement with evasion, the new offence will be issued to any company where an individual acting on its behalf as an employee or contractor facilities tax evasion.

In opposition to the proposals, the Law Society has warned that the new powers could inadvertently increase the practice of the tax evasion schemes it was designed to prevent.

It said the laws may prevent solicitors from giving honest advice on complex legal matters, “increasing the risk that taxpayers may unwittingly enter into unacceptable tax avoidance schemes”.

For more information about the tax and financial services Watson Buckle can provide to clients in the legal sector, please contact us.