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Professional conduct guidelines lay down tax planning standards

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The leading UK accountancy and tax bodies, CIOT, ATT, AAT, ACCA, ICAEW, ICAS and STEP, have drawn up five new standards for tax planning, which will be included in the forthcoming update of their Professional Conduct in Relation to Taxation (PCRT) guidelines, to take effect from 1 March 2017. In particular, the update will make it clear that members must not seek results ‘that are contrary to the clear intention of parliament in enacting relevant legislation’, or that are ‘highly artificial or highly contrived’.

In March 2015, HM Treasury, in its paper Tackling tax evasion and avoidance, called upon the professional bodies to ‘take on a greater lead and responsibility in setting and enforcing clear professional standards around the facilitation and promotion of avoidance’. The bodies promised to review PCRT and ‘look carefully at whether it needs further strengthening in relation to avoidance’.

The new standards for tax planning, agreed in discussions between the professional bodies and HMRC, are:

  • Client specific: Tax planning must be specific to the particular client’s facts and circumstances. Clients must be alerted to the wider risks and the implications of any courses of action.
  • Lawful: At all times, members must act lawfully and with integrity and expect the same from their clients. Tax planning should be based on a realistic assessment of the facts and on a credible view of the law. Members should draw their clients’ attention to where the law is materially uncertain; for example, because HMRC is known to take a different view of the law. Members should consider taking further advice appropriate to the risks and circumstances of the particular case; for example, where litigation is likely.
  • Disclosure and transparency: Tax advice must not rely for its effectiveness on HMRC having less than the relevant facts. Any disclosure must fairly represent all relevant facts.
  • Tax planning arrangements: Members must not create, encourage or promote tax planning arrangements or structures that: (i) set out to achieve results that are contrary to the clear intention of parliament in enacting relevant legislation; and/or (ii) are highly artificial or highly contrived and seek to exploit shortcomings within the relevant legislation.
  • Professional judgment and appropriate documentation: Applying these requirements to particular client advisory situations requires members to exercise professional judgment on a number of matters. Members should keep notes on a timely basis of the rationale for the judgments exercised in seeking to adhere to these requirements.

In a joint statement, the seven bodies said: ‘PCRT has long set out professional and ethical standards which require more of the members of professional bodies than the letter of the law demands, and rightly so.’ The statement continues: ‘We believe these new standards for tax planning achieve an appropriate balance, making clear to the small minority of tax professionals who continue to facilitate and promote tax avoidance schemes that this behaviour is not acceptable, while enabling the vast majority of advisers to continue undertaking responsible tax planning for their clients.’

The CIOT president, Bill Dodwell, said: ‘The task of producing guidance which addresses legitimate concerns about avoidance without preventing advisers from providing full and correct advice to their clients has not been easy.’ However, the government’s challenge was not something the profession could easily ignore. As a consequence, Dodwell added: ‘This latest addition to our ethical guidelines goes further than previously, recognising that what it means to behave with integrity and professionalism in the context of tax planning has changed over time. We must take account of this or else risk falling out of step with what is expected of us by the public and consequently forfeiting trust and respect.’

The updated PCRT, together with a set of frequently asked questions, can be found here.