A change in the law will mean that from 1 April, civil penalties for persons who act dishonestly with a view to bringing about a tax loss while acting as a tax agent will be brought into effect.

Penalties from a £5,000 minimum to £50,000 maximum can be applied.

Misconduct must be by an individual and dishonest. Mere incompetence or gross negligence is not enough. No HMRC guidance yet exists but it has been started that “dishonesty” will usually be evidenced by showing the creation or presentation of some kind of false or misleading picture. The help given must be with a view to bringing about a loss of tax revenue whether a loss actually occurs and should involve assistance in the tax affairs of a client.

This change in the law has undoubtedly been inspired by the current atmosphere against tax planning but I wonder where it will lead and what the point of it is. Most tax planning is performed on a basis of an understanding or opinion of the law.  If a scheme is planned and a structure set up which the planner thinks is within the law but subsequently it is decided isn’t, has that planner created something which is then determined to be ‘false’?

If you think that fanciful, imagine saying (quite genuinely and honestly) to a police officer that you thought you had been doing 40mph when he shows you the radar gun reading of 46mph. You’ve broken that law; would the same principle apply to the hapless tax advisor?

‘All well and good’ you might say, ‘but there must be some law against filing incorrect returns’.  There was.  S99 Taxes Management Act 1970 applied a fine of up to £3,000 to any person who assists in submitting a tax return known to be incorrect (they hadn’t increased the level of fine since 1989).

This seemed to already cover any case where dishonesty was involved so why do we need more law?  I’ve never come across a case of S99 TMA 1970 being applied in my 25 years in tax and it is now being repealed and replaced by the new legislation referred to above. It just seems to be tinkering for tinkering’s sake.

I fear that the only people who will really benefit from this will be the lawyers who will be arguing these cases when they get to court.