Law and Regulation of Tax Professionals

Description

DELETE Foreword Preface Glossary and abbreviations Table of statutes Table of statutory instruments Table of cases 1 Introduction Signposts Overview ‘Tax professional’ and ‘tax agent’ Regulation Future regulation: raising standards in the tax advice market 2 Regulatory framework: an outline Signposts Introduction Types of regulation Direct regulation Indirect regulation Regulation and the law of obligations General ‘Statute of Limitation’ Contract Tort Introductory Elements in professional negligence Other claims Regulation and privilege Criminal Finances Act 2017 Failure to prevent facilitation of UK tax evasion offences Failure to prevent facilitation of foreign tax evasion offences Guidance about prevention procedures Risk management Liability to clients Liability to third parties Having proper insurance and complying with its terms Complying with professional body and/or regulators’ requirements Complying with AML matters Complying with DOTAS and POTAS Complying with DAC 6 Dealing with risks under the Criminal Finances Act 2017 POCA, and other criminal matters Vicarious liability GDPR GDPR principles ‘Personal Data’ (DPA 2018, s 3) Right of access by the data subject (DPA 2018, s 45) Other relevant GDPR provisions Miscellaneous matters Direct regulation: tax legislation and tax courts Tax planning GAAR Tax statutory interpretation Checklist of some matters to consider in respect of any engagement 3 Professional conduct in relation to taxation (PCRT) Signposts Introduction HMRC and the tax planner Professional bodies and applicable standards Background PCRT SRA Standards and Regulations BSB Handbook PCRT and tax planning General Five fundamental principles Standards for tax planning The ‘client specific’ standard The ‘lawful’ standard The ‘disclosure and transparency’ standard The ‘tax planning arrangements’ standard The ‘professional judgement and appropriate documentation’ standard PCRT tax advice help sheet Regulation of tax lawyers SRA Standards and Regulations: principles SRA warning notice: tax avoidance SRA Standards and Regulations: code of conduct Regulation of tax barristers BSB Handbook BSB Handbook: Code of conduct Code of conduct: Core duties The ‘cab-rank’ rule Appendix: SRA Handbook (replaced on 25 November 2019) SRA Handbook: Principles SRA Handbook: Code of conduct 4 Disclosure of tax avoidance schemes Signposts Introduction General The regimes Disclosure of Tax Avoidance Schemes Structure of the chapter (1) From GAAR to DOTAS (2) The purpose of DOTAS (3) THE DOTAS RULES Introductory Notifiable Arrangements ‘Tax advantage’ ‘Main benefit’ The Regulations The 2004 Regulations ‘Connected with employment’ ‘Financial products’ Exclusion The aim of the tests ‘Premium fee’ ‘Everyday tax advice’ The 2006 Regulations Description 1: confidentiality in cases involving a promoter Description 2: Confidentiality where no promoter involved Description 3: Premium Fee Description 4: off-market terms Description 5: standardised tax products Description 6: Loss Schemes Description 7: Leasing arrangements Description 8: employment income provided through third parties Description 9: Financial products Specified financial products Exclusions The VAT hallmarks (1) Retail supplies – splitting and value shifting (2) Offshore supplies – insurance and finance (3) Offshore supplies – relevant business persons (4) Options to tax – land Promoter Relevant business Design promoters Exceptions ‘A firm approach’ A ‘scheme implementer’ A scheme organiser General exclusions from the definition of promoter Professional advisers Co-promoters No promoter Introducers Obligations on a promoter Scheme Reference Numbers Obligations on the promoter in relation to the SRN Obligations on the users as regards the SRN (4) Enforcement of the DOTAS rules Pre-disclosure enquiries Request for introducer to provide information Request for supplemental information Appeals in respect of s 306A and s 314A (5) Penalties Introduction Penalties for failing to notify a scheme Penalties for failing to provide information User penalties (6) From DOTAS to POTAS The POTAS regime The threshold conditions in Schedule 34 The threshold conditions in Schedule 34 Relevant defeat ‘Relevant’ Defeat notices The ‘safeguards’ Contents of a conduct notice Monitoring notices Publicity (7) Finance Act 2021 DOTA POTAS 5 Contract: terms of engagement Signposts Introduction Why does Contract law have relevance to the tax professional? General comments Focus of this chapter Why are contracts important to tax professionals? Professional requirement Commercial requirement Legal requirements Typical terms of business for supply of professional services Contract formation Offer and acceptance Offer distinguished from invitation to treat Acceptance Fees: consideration Contract formalities and freedom to contract Representations prior to contract Express terms of a contract Implied terms of a contract General Term implied ‘in fact’ by the court: ‘business efficacy’ Term implied by statute Introductory Non-consumer contracts Consumer Rights Act 2015: consumers Exclusion of liability and limitation of liability: UCTA 1977 Business liabilities Liability for negligence Liability arising under contract Reasonableness Exclusion of liability, limitation of liability, unfair terms: CRA 2015 Negligence Unfair terms Fairness Terms of a contract subject to requirement of fairness Illustrative list of unfair terms Third party rights Interpretation of contracts Breach of contract Damages Compensatory principle Mitigation Causation/remoteness of damage Contributory negligence Enforcement of a consumer contract: CRA 2015 Right to repeat performance Right to price reduction Limitation period 6 Negligence and the tax professional Signposts Introductory – tort in the context of the regulation of tax professionals Introduction to negligence Professional standards Accountants Tax advisers Solicitors: Solicitors Regulation Authority (SRA) Barristers: Bar Standards Board (BSB) Professional Conduct in Relation to Taxation (PCRT) Taxation Disciplinary Board Duty of care: overview General Duty of care: scope of the retainer Standard of care: overview Would a significant body of reasonable practitioners have acted as the defendant did? Provision of information Standard of care: error in providing assurance Standard of care: breach of duty to give risk warnings Exclusion of liability and limitation of liability: (UCTA 1977) and CRA 2015 Overview Liability for negligence Damages Compensatory principle Losses in a professional negligence claim Contributory negligence Loss of chance Limitation period When is damage suffered? Latent damage Long-stop Conclusion 7 Privilege in tax disputes Signposts Introduction General Privilege is a difficult area which may require specialist advice No adverse inference HMRC’s information powers in FA 2008, Sch 36, privilege and its analogs General Resisting disclosure because the information is privileged (under common law) Resisting disclosure of information that relates to the conduct of an appeal Resisting disclosure because the document is an auditor’s or tax adviser’s document Communications must be confidential to be privileged The two heads of privilege General Legal advice privilege General What is covered by LAP? Category A: the approach to determining whether a communication is seeking legal advice Category A: the purpose of seeking legal advice must be the dominant purpose of the communication Category B: documents evidencing the substance of communications The meaning of ‘legal advice and assistance’ The meaning of ‘lawyer’ or ‘legal adviser’ Issues that arise in case of communications with third parties Meetings with Lawyers and others The meaning of ‘client’ The case of Three Rivers (No 5) and its controversies Communications – the treatment of attachments Litigation privilege General Category of communications covered by LP When are these communications protected by LP? The types of relationships that are covered When are documents covered: communications for the purpose of obtaining information or advice in connection with existing or contemplated litigation? Exceptions to privilege and loss of privilege General Waiver or loss of privilege Sharing privileged material Situations where privilege is overridden by statute Privilege cannot be relied on if the communication took place for or in connection with a nefarious purpose Other miscellaneous exceptions Case studies 2–7 Background facts Comment on case studies 8 Criminal investigations and prosecution Signposts Introduction Overview Criminal liability States of mind Proving the elements of the offence Vicarious liability for a company Direct and indirect and strict liability tax offences Failure to prevent the facilitation of tax evasion Value Added Tax offences Example: Non-payment of VAT security (VATA 1994, s 72(11)) Civil recovery Criminal investigations Civil investigation of suspected tax fraud: COP9 procedure Cases where a criminal investigation is more likely Covid-19-related frauds Prevalence of HMRC criminal investigations Stated aim of HMRC ‘Compliance Handbook’ The criminal investigatory powers of HMRC Answering law enforcement authority initial enquiries Complying with notices and court orders Four key questions to ask on receipt of any court order Disclosure notices and search warrants – SOCPA 2005, s 61 Production orders – TMA 1970, s 20BA PACE 1984 powers Search warrants Timing of the search Compelling the production of material Court procedure Power of arrest Dealing with a ‘dawn raid’: a checklist Pre-planning for a raid Initial entry During the search After the search Dawn raids – five key points ‘Blue bag’ process Applying for the return of seized property Challenging search warrant and court orders Interviews under caution and the role of the legal professional The caution Self-incrimination in criminal proceedings and pre-existing material The role of the legal professional The charging decision Example: ‘Out-of-court’ disposal Criminal prosecutions Magistrates’ court Crown Court Court process Disclosure Criminal trials Sentencing The approach of the sentencing judge Confiscation proceedings Key points 9 Tax evasion and tax facilitation offences Signposts Tax fraud: offences in overview Cheating the public revenue Offences for failure to prevent facilitation of tax evasion Failure to prevent facilitation of UK tax evasion offences UK tax evasion offence Failure to prevent facilitation of foreign tax evasion offences Foreign tax evasion facilitation offence No requirement for actual loss of tax HMRC guidance Statutory defences HMRC’s guidance: relevant body taking reasonable steps to prevent criminal facilitation HMRC Guidance: some examples 10 Anti-money laundering Signposts Introduction Risk assessment Proceeds of Crime Act 2002 The POCA regulated sector Principal money laundering offences Section 327: concealing, disguising or converting Section 328: concerned in arrangements Section 329: acquisition, use and possession Criminal conduct and criminal property Disclosure and the consent regime Reporting suspicions – the regulated sector and POCA 2002, s 330 Nominated Officers Consent Effect of consent Failure to prevent the facilitation of tax evasion under CFA 2017 Terrorism Tipping off, prejudicing an investigation and super-SARs Client confidentiality The Money Laundering Regulations Introduction to the Money Laundering Regulations Scope of the Regulations Customer due diligence Policies, controls and procedures Record keeping Internal reporting procedure Training Resourcing and the MLRO Failure to comply with MLR 2017 Supervisory authorities Guidance issued by supervisory bodies Anti-money laundering guidance for the accountancy sector Anti-money laundering guidance for the tax practitioner Anti-money laundering guidance for auditors Application of privilege to the accountancy profession 11 DAC 6 Stop Press Signposts Introduction General What is DAC 6? Timing UK implementation of DAC 6 Who has to make a report? What and who is covered? – General Legislation Some of the questions raised What is a reportable cross-border arrangement? General ‘Cross-border arrangement’ What is an arrangement? Series of Arrangements More than one Member State or a Member State and a third country What is a cross-border arrangement? Hallmarks set out in Annex IV When is the arrangement available? Intermediary, relevant taxpayer and who needs to report? Multiple reporting Why are cross-border tax arrangements to be reported? Who is an intermediary? The Regulations Introductory Purpose of the Regulations? Structure of the Regulations Reporting obligations Introductory Making a report in practice When must the report be made? Reporting and the UK regulations What is a UK intermediary? Who is an Intermediary? Return Specified period Reportable information Within the UK intermediary’s knowledge, possession or control Exceptions to reporting Report in another Member State? ‘Legal professional privilege’ Reporting obligations: UK relevant taxpayers Relevant taxpayers What type of arrangements are reportable? General Hallmarks Hallmarks in more detail Introduction A. Generic hallmarks linked to the main benefit test B. Specific hallmarks linked to the main benefit test C. Specific hallmarks related to cross-border transactions Specific hallmarks concerning automatic exchange of information and beneficial ownership Specific hallmarks concerning transfer pricing Main benefit test Annual reporting requirement Arrangement reference number Provision of information – reg 11 Employees not intermediaries – reg 13 Penalties and the Regulations Introductory General rule The specified provisions ‘Relevant considerations’ Determination of penalty by HMRC under reg 14(1)(a)(i) – reg 15 Determination of penalty by First-tier Tribunal: daily penalty under reg 14(1)(a)(ii) Determination of penalty by HMRC: further daily penalty under reg 14(1)(b) and penalty in relation to annual report Time limits and treatment of penalties Appeals against penalty determinations by HMRC – reg 19 Reasonable excuse, special reduction, etc Introductory Reasonable excuse Consideration of reasonable excuse Effect of cesser of reasonable excuse Special reduction Appendix – Annex IV Hallmarks Part I. Main benefit test Part II. Categories of hallmarks 12 Miscellaneous forms of regulation Signposts Introduction Fiduciary duties General Who is a fiduciary? Solicitors owe fiduciary duties Restitution Misconduct and misfeasance in public office Contempt Human rights Handling client money Introductory The Bar Standards Board (BSB) The Law Society Institute of Chartered Accountants in England and Wales (ICAEW) The Chartered Institute of Taxation (CIOT) Financial Conduct Authority (FCA) Insurance Appendices Appendix 1: Checklist of some matters to be considered on any engagement Appendix 2: HMRC: The standard for tax agents Appendix 3: Solicitors Regulation Authority – Warning notice Appendix 4: The Law Society – Guidance for solicitors advising on tax Appendix 5: Illustrative Assumptions to incorporate into Tax Professional’s terms of engagement Index