Accountants targeted by HMRC over tax avoidance ‘without any evidence’

The taxman has been accused of employing aggressive tactics against small businesses after it emerged that it was sending speculative letters to high street accountancy firms accusing them of being involved in tax avoidance.

The Times are reporting that HM Revenue & Customs is writing to accountants saying that it believes they are promoting tax avoidance schemes, without producing any evidence to substantiate the claim.

An example of one of the letters, seen by The Times, conceded that firms were under “no formal obligation to reply” but warned that if they did not, it would assume that they may be promoting tax avoidance and that it might consider them for an investigation.

HMRC also threatened to investigate accountants’ personal tax affairs if they did not respond.

Adam Craggs, a partner and head of tax disputes at RPC, the law firm, accused the tax authority of “pushing the boundaries of their powers”. He said: “HMRC is essentially saying that these smaller accountancy firms are guilty of encouraging tax avoidance without providing any evidence whatsoever.

The aggressive approach is indicative of HMRC resorting to ever more desperate measures in their efforts to bring in more tax.”

He added that larger accountancy firms did not seem to be targeted in the same way for what HMRC called a “programme of work looking at agents who display signs of supporting the tax avoidance industry”.

Mr Craggs said that this was “no doubt due to the fact that the bigger firms have the means to deal with such tactics. HMRC is going after smaller high street firms that are less well equipped.”
A spokesman for HMRC said: “This is part of a series of communications to a limited number of agents, recorded as having a client who has been a member of a tax avoidance scheme.

“These letters serve to educate agents about the new promoters of tax avoidance scheme regime and encourages them to get in touch, and to clarify the extent to which they are involved in advising their clients on tax avoidance risk.”