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Tax bodies flag risks of undertaking ‘artificial’ tax avoidance

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The leading tax bodies have updated their joint guidance for tax advisers on professional conduct in relation to taxation. It was last updated in 2006, and the latest version has been the subject of discussion since 2007.

It includes guidance on completion of tax returns; access to data by HMRC and other authorities; irregularities including errors; HMRC rulings; and tax avoidance.

The guidance on tax avoidance is largely unchanged. While it points out that avoidance is legal, and all taxpayers ‘have the right to arrange their affairs under the law to minimise their liability to tax’, it also advises members to consider carefully, and in the light of the client’s wider interests, the ‘risks and merits’ of arrangements that the tax authorities may view as artificial.

A new section advises that members should ‘ensure that clients are fully aware of the risks of undertaking transactions that HMRC may regard as “unacceptable” and that such transactions may be subject to litigation or possible changes in law’. The government indicated in 2004 that such changes may be retrospective.

'Professional Conduct in relation to Taxation' has been issued by the Chartered Institute of Taxation, the Association of Taxation Technicians, the Association of Certified Chartered Accountants, the Institute of Chartered Accountants in England and Wales, the Institute of Chartered  Accountants of Scotland, the Institute of Indirect Taxation and the Society of Trust and Estate Practitioners.