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MPs’ stance on ‘big four’ secondments is absurd, says Treasury

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HMRC and HM Treasury have rejected Margaret Hodge’s claim that the large accountancy firms have an ‘unhealthily cosy relationship with government’.

Hodge, chairman of the Commons public accounts committee (PAC), claimed today that there was a ‘ridiculous conflict of interest’ – that should be banned in a code of conduct for tax advisers – when firms second staff to the Treasury to advise on formulating tax legislation.

‘When those staff return to their firms, they have the very inside knowledge and insight to be able to identify loopholes in the new legislation and advise their clients on how to take advantage of them. The poacher, turned gamekeeper for a time, returns to poaching,’ she said.

But a Treasury spokesperson said the PAC’s analysis and conclusions ‘bear almost no resemblance to the reality of what government is doing or what is happening’.

‘In particular, as a matter of principle, the suggestion that government shouldn’t work with business and indeed anyone affected by its policies is totally absurd.’

Big four firms defend tax role as MPs call for code of conduct

In today’s report the PAC said there was ‘a risk that the large accountancy firms’ provision of advice to government creates a perception that they wield undue influence in the creation of legislation, in their own interests and those of their clients’.

KPMG had emphasised that the firms provide technical advice rather than actually writing tax law, the report said. ‘This may be so, but few MPs are tax experts and parliament relies on the technical advice that is provided by technical experts such as those seconded to government by the four firms.’

The PAC added: ‘We are nonetheless very concerned by the way that the four firms appear to use their insider knowledge of legislation to sell clients advice on how to use those rules to pay less tax.’

The committee recommended that ‘HM Treasury should ensure that the code of conduct we have proposed for tax advisers sets out how conflicts of interest should be managed when a firm advises government on the formulation of tax law and subsequently provides tax advice to clients in related areas.’

Jim Harra, director-general of business tax at HMRC, told the BBC: ‘We do use secondments as part of our way of consulting on the design of tax legislation. The people we bring in – very small numbers – are closely directed by senior officials. Clearly, they do go back out with some expertise.

‘We watch very carefully what advice accountants are giving to their clients. Provided that advice is how to use the legislation in accordance with the way parliament intended, then we have no problems.’

Kevin Nicholson, head of tax at PwC, said: ‘We provide technical insight to government but only when asked and are never involved in deciding tax policy which is a matter for the government.’

Bill Dodwell, head of tax policy at Deloitte, said: ‘We have responded to requests for secondees and have provided a small number of people with some tax experience to help the Treasury and HMRC teams working on policy initiatives. Our secondees have all reported to experienced Treasury and HMRC officials and have never driven any policy initiative.’

Dodwell noted that the PAC acknowledged the valuable role provided by tax advisers in giving technical tax advice to the government. ‘We do not believe that there has ever been any conflict of interest but would want to help ensure that there is no perception of conflict. We would also note that bodies such as the Chartered Institute of Taxation and the chartered accountants’ institutes – which we support – put in significant effort into ensuring that the Treasury and HMRC receive views from smaller firms and small business.’

Jane McCormick, head of tax at KPMG in the UK, said her firm provided individuals on secondment when requested. ‘Their role is to provide tax technical input and commercial experience so that the authorities can make informed choices on tax policy.  Our secondees do not write legislation or make policy decisions.’