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'The boys who won't say no'

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Jolyon Maugham, tax barrister at Devereux Chambers, wrote a blog post, censuring what he called ‘the boys who won’t say no’ who issue formal tax opinions advice for substantial fees. Maugham referred to an opinion 'on his desk' which ‘expresses a view on the law that is so far removed from legal reality that I do not believe he can genuinely hold the view he says he has. At best he is incompetent. But at worst, he is criminally fraudulent: he is obtaining his fee by deception’. Maugham wrote that there were 'slightly under half a dozen' barristers who write that such opinions which pass his desk 'all the time'.

‘Assume you are a seller of tax planning ideas – a “house”,’ Maugham wrote. ‘You have developed a planning idea that you wish to sell to taxpayers. But your customers will typically want independent corroboration – from a member of the Bar – that your idea ‘works’, that is to say that it delivers a beneficial tax treatment. Or, to use the preferred euphemism, that it “mitigates” your tax liability. The fees that can be generated from bringing a planning idea to market are substantial: I am aware of instances where a single planning idea has generated fees of about £100m. But without barrister sign-off, you have nothing to sell.

‘This fact creates predictable temptations for the Bar. If you are prepared to sign off a planning idea, the house will pay you handsomely. In some instances hundreds of thousands of pounds for a few day’s work. But the tax code is not made of Swiss cheese. Planning ideas that actually deliver are rare … The mechanisms that transfer tax risk from those who bear it to those that should are too weak. Those that bear it are the individuals [who sought and implemented the tax planning advice]. As I have said, in many cases they have no way of knowing whether they are engaging in “good” or “bad” tax planning. And yet they bear all the risk. Those who should bear it – at least share it – are the boys [who won’t say no]. They grow rich saying yes when no one is better placed than them to know they should say no.’

Maugham added that: ‘The mechanisms that transfer tax risk from those who bear it to those that should are too weak’. He suggested a potential solution might lie in placing UK barristers and other tax advisers under a similar obligation to that placed on US tax advisers by IRS Circular 230, §10.37(a)(2), which imposes financial penalties on practitioners where their written advice does not meet certain standards.

Maugham’s comments brought a response from Vanessa Davies, chief executive of the Bar Standards Board (BSB), who said that barristers were required to report serious misconduct following a change from January 2014: ‘Any barrister who genuinely believes that they have evidence of colleagues breaching the code should report it to the BSB so we can consider whether enforcement action is necessary.’

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