CH178030 - Sanctionable conduct by tax advisers: conduct notice: multiple tax advisers
When investigating sanctionable conduct, there may be multiple tax advisers involved. This may arise in a number of scenarios, including (but not limited to):
- a taxpayer has directly engaged multiple tax advisersto provide advice or services in relation to the same tax affairs
- a tax adviser has engaged another tax adviser to provide advice on their client’s tax affairs
- a tax adviser is an employee or contractor of a business that is a tax adviser
- a tax adviser is part of a group of companies where at least some of those other companies are tax advisers
In some cases, multiple tax advisers will have engaged in sanctionable conduct and in those cases they should all be assessed for a sanctionable conduct penalty for their part in intending to bring about a loss of tax.
However, in some cases where multiple tax advisers are involved with a taxpayer and a loss of tax, some of those advisers may not have engaged in sanctionable conduct themselves. In cases like this, it is only the tax advisers who engaged in sanctionable conduct who may be assessed a penalty.
Where we have reasonable grounds to suspect that multiple tax advisers have engaged in sanctionable conduct, information gathered using file access notices can help establish whether each tax adviser engaged in sanctionable conduct, and to what extent they did so. (In cases involving tax adviser firms and employees who are themselves tax advisers, a file access notice will typically, in the first instance, be more appropriately directed to the firm rather than an individual employee.)
Remember that to have engaged in sanctionable conduct, a tax adviser must have acted with the intention of bringing about a loss of tax revenue. An adviser who is simply mistaken, or careless, or even negligent, will not have engaged in sanctionable conduct. Therefore, when determining whether a tax adviser has engaged in sanctionable conduct, we should consider:
- The extent to which the adviser was acting under another person’s direction or control (for example, following employer instructions, scripts, or mandated processes)
- The degree of autonomy the adviser had in making decisions, exercising professional judgement, challenging ways of working or raising concerns
- Whether the adviser was aware that their actions would bring about a loss of tax
- Whether the adviser deliberately deviated from, ignored, or bypassed processes, controls, or escalation requirements they were expected to follow (for example, those of their employer)
- The role of the adviser in the end-to-end process (for example, whether they were undertaking administrative steps or designing/implementing the approach that led to the loss)
In all cases what matters is whether the tax adviser engaged in sanctionable conduct. If they have only behaved carelessly, they will not have engaged in sanctionable conduct.
Example 1
Pauline is employed by a company that specialises in claiming repayments from HMRC. Pauline’s role is to call potential clients and tell them they are eligible for a refund from HMRC. If they agree, Pauline inputs their details into the company’s systems and repayment claims are made automatically. Pauline follows a script provided by her employer, calls the numbers her employer has told her to, and inputs the information following the employer’s instructions. Pauline does not check whether the claim is valid as her employer has not told her to do this and has not provided any information about how to do this. Pauline has no prior knowledge of repayment claims to make any assessment of whether a claim may be valid.
The company has previously been told by HMRC that they are making large volumes of ineligible claims and that they need to implement checks before submitting claims. The company has taken no steps to enact this advice.
In this case, although Pauline’s actions may have resulted in a loss of tax, they are not sanctionable conduct as she was not doing this with the intention of bringing about a loss of tax:
- she was acting under close direction (scripts and instructions),
- she had no autonomy to challenge or assess claims,
- she had no knowledge, and could not reasonably have been expected to know, the claims were invalid
The repayment company is likely engaging in sanctionable conduct as they are deliberately making claims knowing that they are ineligible and will result in a loss of tax. They have failed to implement controls, indicating knowledge and intentional continuation of the behaviour.
Example 2
Ross is employed by a tax advice company. Ross is responsible for calculating tax liabilities for his clients and advising them on ways to reduce their tax liability legally. The company training and guidance tells its tax advisers that they must provide advice that is based on all the facts available, using reasonable interpretations of the law, guidance and case law. Where Ross is using a novel interpretation, he must discuss it with a senior tax adviser and agree the chance of success. Ross has completed this training and a record of that is kept.
One of Ross’s clients asks for a way to reduce their tax liability. Ross advises them that there is way to reduce their tax liability using a novel interpretation of the law. Ross was aware that the interpretation had a low chance of success but chose not to escalate it, intending to secure a tax reduction for the client regardless of the risk. This is contrary to the company’s processes. The interpretation is later challenged and loses at Tribunal.
The company has not engaged in sanctionable conduct. Although they may have the contract with the client and have employed Ross, they have in place processes to prevent tax losses from occurring and there is no evidence it intended to bring about a loss of tax.