Elspeth Orcharton: To avoid tax avoidance, keep the rules simple

Published on 26/07/2012 00:00

THE spate of recent speeches and announcements by Treasury minister David Gauke could cynically be seen as an attempt to be doing something before interest in tax matters is lost in favour of the excitement of the Olympics. But what lies underneath might be the next step in one of the most fundamental changes in UK tax law in years.

One possible outcome of the recently announced consultation on tax avoidance schemes is that it may bring welcome clarity to an area where it has been sorely lacking.

Controversies about tax avoidance have led Icas for some time to call for a “line in the sand” to be drawn – a clear demarcation between acceptable and unacceptable tax planning. The issue must also be tackled within a sound legislative framework.

The increased emphasis this new consultation places on the Disclosure of Tax Avoidance Schemes provisions should mean HM Revenue and Customs has a clearer understanding of how these work. Moves by HMRC to publicise schemes it considers ineffective or likely to be seriously challenged in the courts will help the public more clearly consider the possible consequences of using those schemes.

For tax practitioners, greater clarity could mean avoiding being criticised for apparently promoting avoidance schemes, on the one hand, and on the other dealing with their professional requirement to act in their clients’ best interests, offering advice on how those clients’ tax affairs can be managed efficiently.

The risk is that the consultations, like so many before, ignore advice to keep rules simple and clear. It is crucial to avoid more ministerial tinkering, which over the years has made the UK tax system as complex as it is, and, coincidentally, has fostered a legislative environment that creates as many loopholes as it closes.

The consultations also raise questions for the Scottish Government. How will it and Revenue Scotland, the body to be created to collect and administer taxes levied by the Scottish Government, approach anti-avoidance?

• Elspeth Orcharton is director of international and corporate tax at Icas (the Institute of Chartered Accountants of Scotland).