Tax planning schemes

I was intrigued to see this in the newsletter of a substantial firm of accountants recently:

Certain niche promoters of tax planning arrangements have recently chosen to increase the extent to which they promote directly to businesses, rather than, as historically has been the case, to advisors such as ourselves for evaluation.

We undertake due diligence on such proposals on a regular basis and, with a few honourable exceptions, find that we are unable to recommend them. This is because of concerns over, for example, the robustness of the tax law analysis, the conviction and strength of supporting opinions, the cost vs benefit ration, the evidence of success when faced with HMRC enquiry, the professionalism of documentation and implementation, and not least of 'after-sales' care.

The direct promotion of schemes to businesses reminds me of just such a situation I encountered almost 20 years ago when I was the tax partner at a large firm of accountants. The FD of a client company told me that the owners had been made aware of a scheme that would enable them to extract monies tax free from the company. The promoters had appealed to the owners' greed and their belief that their 'large firm of accountants' were overly cautious when it came to dealing with (what was then) the Inland Revenue.

We checked out the paperwork and Counsel's opinion and expressed doubts as to the prospect of the scheme achieving the desired outcome. Our advice was ignored and the directors paid thousands of pounds to the promoters. I left the firm a couple of years later and only heard quite recently that my advice had in fact been spot on. Ten years down the line the Directors accepted the Revenue's arguments. The scheme didn't work after all. The promoters kept their fees as is often the way.

The reason that some promoters now try to go direct to clients is because an increasing number of accountants are becoming more cynical. And are becoming more effective at helping clients to understand the risks inherent in a pre-packaged scheme - and, when they do this the clients' reaction is typically:

“Now I understand it properly, why would I want to go into a scheme like that?”

Previous posts that address similar issues:

• "Raise the white flag" - Are tax schemes worth the effort any more?
• "Give me pure tax evasion any day"
• HMRC challenge sideways loss relief tax avoidance
• HMRC confuse tax avoidance and tax evasion again
• Beware of HMRC spotlights - EBTs now included
• Were you wasting time advocating this tax scheme?
• The beginning of the end for structured tax avoidance schemes?
• Bending vs breaking tax rules