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Tax Tax

Toughen the regulation of tax advisory firms

Last updated: 06:37pm 3 May 2019

We will legislate for tougher regulation of tax advisory firms.

Conservative Party Manifesto 2017, p.16

Our verdict

This policy is about tax evasion and tax avoidance which. In 2016/17, tax evasion and avoidance cost the UK £7 billion, and in 2017 the high-profile Paradise Papers investigation exposed the extent to which some tax firms exploit legal loopholes to save money for their clients. The government has promised to make it tougher for this to happen, by putting the squeeze on tax advisory firms.

So far we can consider two pieces of legislation that have been passed that further regulate the work of tax advisory firms. Firstly, sections 45 and 46 of the Criminal Finances Act 2017, which came into force on the 30th September 2017. It made companies and partnerships criminally liable if they failed to prevent tax evasion, even in instances where the business was not involved or not aware of it. The consequences for breaching the Act include unlimited financial penalties, confiscation orders, serious crime prevention orders, regulatory issues and reputational damage.

Secondly, “tax enablers legislation” in Schedule 16 to the Finance (No.2) Act 2017 was passed on 16th November 2017. It introduces new penalties for those who facilitate abusive tax avoidance arrangements. An “abusive tax arrangement” occurs when the arrangement is entered into for the main purpose of obtaining a tax advantage which “cannot reasonably be regarded as a reasonable course of action in relation to the tax provisions”.

We’re marking this policy as ‘done’ because we think it’s reasonable to determine that regulations are tougher by the presence of these news laws. But we’ll be getting opinion from other organisations about their view on this too, and looking for evidence of the effectiveness of these new regulations. It’s worth noting that tougher laws don’t necessarily equate to more effective laws, but the government isn’t promising to ‘prevent’ tax avoidance or evasion or ‘reduce’ it in any measurable way. This is where independent advice will help, so we’ll update this page as soon as we can. In the meantime you can follow this policy for updates.

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