CH177060 - Sanctionable conduct by tax advisers: file access notice: meaning of reasonable grounds to suspect
‘Reasonable
grounds to suspect’ means that there are facts which, either alone or taken
together with others, lead us to think that a tax adviser’s actions, or
omissions, were done with the intention of bringing about a loss of tax
revenue. We must consider whether another person, looking at the same
information, would consider our suspicion reasonable.
Having
reasonable grounds to suspect that a tax adviser has engaged in sanctionable
conduct does not mean that we have to already be in a position to determine
that the tax adviser has engaged in sanctionable conduct. The information
received using the file access notice will help us to determine whether the tax
adviser has engaged in sanctionable conduct.
On the
other hand, ‘reasonable grounds to suspect’ does not allow us to make
speculative enquiries, seeking information merely in the hope that something
relevant will crop up. We must be able to identify specific grounds.
Examples
'Reasonable grounds to suspect' is a context-sensitive test. This means that facts which might constitute reasonable grounds in one context might not constitute reasonable grounds in another context. It will always be important to make any decision based on the specific facts of the individual case.
These examples have no bearing on the fact that a taxpayer is responsible for their own tax position, or whether they are liable to penalties or other sanctions.
Example 1
During an enquiry into a taxpayer’s tax position, HMRC finds a loss of tax. The taxpayer provides documents showing that they received tax advice about how to record their transactions so that they could pay less tax. The tax adviser told them that this was a valid interpretation of the law and that a tribunal would be likely to agree with the interpretation. The documents indicate that tax adviser’s advice was based on HMRC guidance for a relief that applies only for a specific activity, and that the tax adviser appeared to be aware that the taxpayer did not perform this activity. HMRC has reasonable grounds to suspect that the tax adviser engaged in sanctionable conduct.
Example 2
When processing claims for repayments of income tax, HMRC finds that there are a large number of invalid repayment claims submitted by a tax adviser. When discussing the claims with taxpayers, HMRC finds that they entered their information into an online form and that no further contact was received from the tax adviser. In many cases, the taxpayers did not know that a repayment claim had been submitted until HMRC enquired into the claim. HMRC finds that the tax adviser’s website states that repayments are guaranteed.
For the information available, HMRC concludes that the tax adviser has been submitting invalid repayment claims. It is likely that a professional tax adviser would know that these claims were invalid, and that a competent tax adviser would take steps to check the information provided before submitting it if it appeared that the claim would be invalid. HMRC has reasonable grounds to suspect that the tax adviser engaged in sanctionable conduct.
Example 3
A taxpayer’s return shows that they have claimed a relief which they are not entitled to. When HMRC enquires into this, they state that a tax adviser told them they could claim the relief. The tax adviser only provided advice in relation to this single relief.
The taxpayer provides documents to support their position. The documents show that the advice made reference to relevant legislation and HMRC guidance. They also shows that the advice was based on incorrect information provided by the taxpayer. Although the taxpayer knew or should have known that this information was incorrect, there is no information to suggest that the tax adviser knew the information was incorrect.
The tax adviser provided correct advice based on the information they were provided. HMRC does not have reasonable grounds to suspect that the tax adviser engaged in sanctionable conduct.