Hefty fines for solicitors that ‘enable’ tax evasion

Solicitors ‘enabling’ tax evasion or unlawful offshore schemes will incur civil penalties under new sanctions introduced at the beginning of this month.

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.

Recent reports and Treasury correspondence suggest the regime will capture 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.

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

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.

Proposals have been strongly criticised by the Law Society, which warns that the new powers could inadvertently prevent solicitors from giving honest advice on complex legal matters, thus “increasing the risk that taxpayers may unwittingly enter into unacceptable tax avoidance schemes”.

For more information about the tax and financial services Moore Thompson can offer to professionals operating in the legal sector, please contact us.