MPs on the tax action group are calling for an amendment to the Economic Crime Bill to allow for prosecution of promoters and enablers of abusive tax schemes
The APGG on anti-corruption and responsible tax is currently seeking an amendment to the second Economic Crime Bill to allow for more straightfoward criminal prosecution of promoters and enablers of abusive tax schemes.
The MPs said that 'the problem we have identified is that prosecuting these bad actors under existing law is almost impossible because of an evidential snag'.
Dame Margaret Hodge, who chairs the all-party group on responsible tax, said: ‘In order to bear down on egregious tax abuse, we must tackle the role of enablers by holding them to account for their advice.
‘In most serious cases, these enablers should be subject to criminal prosecutions. However, prosecuting these bad actors under existing law is made harder by the need to prove they’re dishonest.
‘Without strengthening the ability of law enforcement to tackle these enablers by making prosecutions practical and possible, there is little credible deterrent against the minority of wrongdoers that profit by trading in the very worst tax advice.’
Criminal prosecutions of promoters and enablers of abusive tax schemes require proof of dishonesty. In the context of egregious tax avoidance, it is too easy for the promoters and enablers of these schemes to fend off allegations of dishonesty by claiming it was within the range of reasonable expert opinion to believe that the scheme they were promoting would work. Often this claim is transparently unconvincing to experts, but would very likely be enough to make a prosecuting authority decline to place the matter before a jury.
To address this evidential issue, the APGG proposes applying the ‘double reasonableness test’ in the General Anti-Abuse Rule (GAAR) to determine whether a tax scheme was within the range of reasonable expert opinion. If it was not, then it is clear that the scheme was being promoted dishonestly.
There is already the established statutory test under the GAAR to determine whether a scheme was within the range of reasonable expert opinion. The MPs propose that the GAAR test be applied to assist in determinations of criminal liability in prosecutions of tax avoidance enablers.
In its latest paper, the APGG obtained advice of Justin Rouse QC, a senior barrister specialising in criminal law, and his advice is reflected in the analysis.
Broadly, counsel confirmed that the proposed legislation may be enacted without substantive concerns. He agreed that the hypothetical scenarios in which the measure might result in some kind of unjust prosecution were ‘inherently unlikely’ and advised that the practical effect of the measure will ‘simply be to enable prosecutions of dishonest advisers that would otherwise be very difficult for evidential reasons’.
The APGG said: ‘We remain convinced that this measure is sound, and will continue to pursue its implementation at every opportunity.’