Inland Revenue Shifts Tax Scheme Reporting Burden To Clients

by Jason Gorringe, Tax-News.com, London

08 October 2004

The UK's Inland Revenue on Wednesday unveiled plans to shift the responsibility for tax scheme disclosure to the clients of lawyers, in order to resolve a disagreement between the accounting and legal communities.

In guidance relating to the government's new reporting regime for tax avoidance schemes, which came into force on October 1, the Law Society had advised lawyers to ignore the majority of the requirements, arguing that to provide the information requested by the authorities would in most cases violate lawyer-client privilege.

This caused outrage amongst accountants, who felt that the legal community was being afforded an unfair advantage in terms of the provision of tax advice.

Under the terms of the solution presented by the Revenue this week, clients will be obliged to disclose details of a scheme in which they are participating within five days of the first transaction, and will face initial fines of £5,000 for unreported schemes, with a further £600 fine for every day that the scheme goes unreported after its discovery.

The proposed rule change, scheduled to come into force on November 19, has reportedly met with approval from the legal community.

However, speaking to the Telegraph on Thursday, Chas Roy-Chowdhury of the Association of Charterd Accountants begged to differ, suggesting darkly that:

"I would not be surprised to see a legal challenge from lawyers to this legislation."

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