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By Jason Piper, ACCA’s Senior Manager, Tax and Business Law

Those of you with long memories (or chronic insomnia) may remember a blog I wrote in 2011 on the topic of HMRC’s approach to discovery assessments. To recap, the worry was that HMRC were using discovery as a backstop to try to cover up their own administrative failings, trying to claim that some technical deficiency in the taxpayer’s documentation entitled them to the longer time limits of what is meant to be a reserve power used only in rare cases.

Well, this week I read another case report, and they’re still at it. Like one of the earlier cases, the taxpayer had been using a reportable “DOTAS” arrangement, and the question was whether they had properly alerted HMRC to the structure so that HMRC could challenge it inside the usual 12 month window. What sets this latest case apart and makes it particularly relevant is that the debate only arose because of an issue in the taxpayer’s software package.

The details of the case turn on fine technical points of law, but the fundamental issue was whether the taxpayer had deliberately caused a loss of tax. For this to be the case, they needed to have consciously entered the relevant entries where they did in the return. In fact they had only put the entries where they did because a shortcoming in the software prevented the “correct” disclosure – all the right numbers were there to create the intended result, and there was clear notification in the “white space” of what had happened and why.

Neither the taxpayer nor his advisers appreciated that strictly the boxes they had used created a subtly different legal groundwork for the desired liability, with an immediate and inevitable loss of tax, rather than the creation of a freestanding credit which as a matter of choice had been set against the relevant income.

The practical upshot was that because the taxpayer had not deliberately created a loss of tax, HMRC could not apply the 20 year limit for claims that they would have needed to rely upon by the time they got around to trying to sort things out properly. Now, none of this goes to the rights and wrongs of the underlying scheme – but what it does illustrate is that the tax law and the software that purports to implement it are inextricably linked.

How *does* the law deal with situations where the software doesn’t quite align to the legal requirements? On the basis of this case, the answer to that would appear to be “slowly and painfully”. If it were only the users of esoteric avoidance schemes finding that the software can’t quite reflect the reality of their tax affairs in strict accordance with the minutiae of the 19,000 pages of UK tax law then it may not be such an issue.

But HMRC’s brave new world of Making Tax Digital beckons, and in this new legislative wonderland of interim reports, revised record keeping requirements and The Death Of The Tax Return, the Tribunals, taxpayers and HMRC alike will be finding out for the first time just how well the software developers have been able to predict what the final shape of the clauses passed in Finance Act 2017 will turn out to have been.

The new software packages haven’t been written yet – but then again neither have the rules that they’re supposed to implement. As Raymond Tooth and the Commissioners for Her Majesty’s Revenue and Customs, 2016 UKFTT 723 TC05452 illustrates, the ability (or otherwise) of the software to accurately reflect precisely the requirements of the Taxes Acts can be fundamental to whether a tax liability even exists – and that’s too important an issue to rush. There’s a line to be drawn between agile development and clairvoyance; developing the process and software for MTD before we know what the legal basis is for it runs the risk of falling the wrong side of that line.



By by Jason Piper, ACCA’s Senior Manager, Tax and Business Law

It’s a question that’s come back into the limelight in the UK in recent days, and I was on Radio 4’s Money Box on Saturday with George Turner of the Tax Justice Network discussing this very question.

And it’s a question that that deserves careful consideration. After all, when the issue was first looked at in Pakistan, they found that most of the sitting MPs couldn’t publish their tax returns – not because of any legal prohibition, but simply because they hadn’t registered to pay tax at all, claiming instead not to earn enough to have to.

But if we were to ask elected officials and representatives to publish their tax returns (this question obviously doesn’t apply in Finland, Sweden, Norway or Pakistan, all of whom now publish everyone’s tax information), what would we hope to achieve? After all, it’s a good idea to understand why you’re doing something before you do it.

One argument for publication is where the tax burden itself is discretionary – that is, the taxpayer and tax officer agree the liability between them through a process of negotiation, rather than applying fixed laws. There’s a clear benefit to transparency and accountability if you publish in that situation, as a check on the tax authority’s exercise of its discretion.

But there are very few areas of tax law left with that sort of flexibility; the vast majority of systems now apply fixed treatments to particular sets of circumstances. Once you’ve earned money, or carried out given transactions, the tax office has to treat it in a particular way. What’s important is what the taxpayer has done, and of course that it gets reported accurately on the returns.

Obviously we want to be comfortable that public officials aren’t making the wrong payments under the law, whether through lack of care or knowledge, or deliberate dissimulation. There’s a legitimate need for society to be certain that the politicians who want to frame the laws which govern the tax system for everyone, and spend the money that gets contributed under that system, are shouldering their share of the legally imposed burden as the money goes in.

But that again should be the job of the tax office, and if we don’t think it’s well enough resourced to do that job then the answer must surely be to fund a properly enabled independent inspectorate to check on things. A crowdfunded approach to fault finding, where we have to rely on the public to spot problems because the tax office can’t, doesn’t sound particularly appealing, especially if it only applies to politicians. The benefit of a properly functioning tax inspectorate is that it works for the benefit of the whole population.

Of course, as an individual voter, a citizen may want to understand a little more about the motivations of the people in charge of their tax laws. We don’t want anyone involved who’s not prepared to abide by the law at all as it stands, but as a voter I might want to decide who I do want based on their approach to tax planning.

One way to establish that is where there is still an element of discretion in the system, which is how the taxpayer has decided to structure sometimes complex affairs – do they appear to have taken the path which minimises tax, or opted to pay more?

The problem with trying to work that out from a tax return is that it’s not really designed to tell you that.

There is a box to tick on the UK tax return if you’ve engaged in a notifiable tax avoidance scheme that’s registered with HMRC, and that would be a fairly clear indicator of a willingness to test the limits of the law. But what of a return which indicates a “middle of the road” tax planning structure? There’s no way you can tell from the return whether the taxpayer really wanted to do something more aggressive but couldn’t afford the fees, had to structure things that way for other commercial reasons, or didn’t fully appreciate that some people might consider the structure “aggressive” in any way, and wouldn’t have done it if they’d realised.

If the problem is that we don’t think people should be using complex arrangements which impact on their tax liability at all, then the answer is to simplify the system, not just shame politicians into steering clear. After all, there are far more celebrities, footballers, businessmen and city high-fliers who can still go ahead and use those structures, who wouldn’t necessarily have to publish details of their personal financial affairs.

And that highlights another aspect of publishing tax returns – they won’t necessarily give you the full picture. You won’t know about any non-taxable income, which doesn’t have to be declared – and someone who’s been paying into the various tax-exempt UK structures (TESSAs, PEPs, ISAs) for a long while could easily have well over £1m of capital earning away; if that’s not making £40-50k pa, tax free, then they’ll be having stern conversations with their IFA. Inheritances, gambling winnings – none of those would typically show up. Even the humble feed in tariff could account for up to £2k of tax free income.

Even more importantly, you won’t get a full picture of the household’s wealth. It’s easy to find examples of politician’s who’s spouses have independent careers which are more financially successful than their own (Tony Blair and Cherie Booth, or Nick Clegg and Miriam González Durántez are just two which spring to mind). We won’t necessarily be able to reconcile the politician’s lifestyle to their own tax return if they share wealth with a successful other half – but why should details of their spouse’s independent career be in the public eye?

And in any event, is it a politician’s absolute wealth, in isolation that’s relevant? Surely it’s as much their attitudes to wealth and tax (how they earned it, what they do with it) that matter – but you just won’t get that from a tax return, which after all was never designed to capture that sort of information. At best you’ll get an incomplete indication, and at worst it might be misleading – an innocent mistake, or unusual family circumstances, might present a picture that looks like an aggressive tax avoidance scheme. Releasing a tax return might work as a symbolic gesture, but it won’t necessarily on its own meet any of the legitimate goals that society, or the politician, might have around transparency and accountability.

If society thinks tax is important (and it should) then understanding properly how those who write the tax laws and spend the tax receipts approach those obligations is just as important.

We need a coherent approach to accountability and transparency around that, as well as a coherent approach to designing tax systems that are properly administered by well resourced authorities. Perhaps we could try judging politicians by how they’ve increased tax authority staff and funding levels, or striven for simplicity, certainty and stability in the tax systems we all rely on to deliver the funds to maintain society?


Another year, another conference season, this year to sunny Brighton for Labour, and the Northern Powerhouse, Manchester for the Conservatives. As the mix of politicians, journalists, business representatives and the lobby headed off, several of ACCA’s team were there to represent our member and student views.

This year, ACCA joined forces to hold a joint business reception with the FSB, IoD, BCC, EEF, ICAEW and IPSE. The the newly appointed Shadow First Secretary of State and Shadow Secretary of State for Business, Innovation and Skills, Angela Eagle MP addressed the crowd and talked about her desire for business to be part of the policy conversation in the coming months and talked about the need for a new, kinder politics.

Further engagement at Labour included a private dinner on pensions supported by Aviva with Alison McGovern MP and a PWC event on fiscal responsibilities with Rebecca Long-Bailey MP, shadow exchequer to the Treasury. These events offered ACCA the opportunity to highlight our position on pensions and our policies on tax, both areas we will continue to engage with Labour in the coming months.

Straight after Brighton, ACCA went up to Manchester for the Conservatives. Again we hosted a joint business reception, this time with the guest speaker being the Chancellor of the Exchequer, George Osborne MP, who offered words of thanks for the continued support from the business community. The Chancellor welcomed the contributions of all the organisations – including ACCA – and their commitment to working with the government to build long term economic growth.

Again at the Conservative conference, ACCA was represented at private dinners on pensions with David Rutley MP, PPS to Iain Duncan Smith, Secretary of State, Department for Work and Pensions, an event on tax with Greg Hands MP, Chief Secretary to the Treasury. And we also attended a further two events on the rising phenomenon of the self-employed with David Morris MP, Peter Aldous MP and Charlie Elphicke MP.

ACCA was of course quick to point to the fact accountants are consistently rated as the most trusted advisers by SMES and colleagues highlighted the advisory role our members play in supporting the self-employed.

Whilst approaching the issues from different angles, both Conferences had lots of events on devolution, public sector reform, Europe, skills and the economy. With the Spending Review set for 25 November, much of the chatter around the conference was around what would stay and what would go, with some departments facing cuts of up to 40%. A lot of MPs discussed the need for a new relationship with the private sector and the role that public procurement can play in shaping this. As we’ve seen with the government’s approach to the living wage and apprenticeships, we expect to see more use of procurement as a model for getting business to behave in a certain way, and there is certainly a growing recognition that the relationship between business and government is changing.

Arguably one of the most forward-looking events was held by the Big Innovation Centre, which is designed to bring together business, public agencies and universities, which hosted events on intangible assets and intellectual property, an area of particular interest to ACCA UK. With studies suggesting that up to 80% of a listed company’s share price is no longer supported by the presence of tangible assets on their balance sheets, ACCA has been conducting work into how SMEs can account for and understand the effect that their intangibles and innovation is having on their business. Our Malaysian pilot is already available to download here but do keep your eyes open for our UK study.

If you would like more information on any of the above or our government engagement programme, please contact

Accountants are good with numbers, almost by definition. It’s what they do. But many of the biggest markets where the numbers have done the most to shape society now seem to be asking for more than just the bottom line, more than just the shareholder return. And worse yet, it may even be that the focus on financials has gone beyond a positive influence and is leading us down the path to global disaster.

The focus on meeting numerical targets has driven two business scandals to break this summer – the Toshiba accounting issues, and Volkswagen’s diesel engine emissions troubles. And while they look on the surface to be very different affairs, the underlying issues are disturbingly similar – set an apparently impossible target, individuals in business are driven to bend or even break the rules just so that they can disclose a set of figures at one point in time which superficially make the grade. But in both cases, in straining to reach that artificial goal they’ve missed their way and lost sight of what society sees as their real objective.

And the pattern repeats at a macro level. On a global level, countries are ranked by GDP. And yet eternal exponential growth, which is what focussing on GDP entails, will break the planet. So what are we going to measure instead as our “target” if financial numbers have had their day?

The change is coming already – businesses aren’t just being measured on how much profit they make; how much tax they pay back into society is growing in importance. And how they make the profits, and divide up what they haven’t paid in tax, is a focus of interest. Even if investors in developing markets are still focussed on the value of audited numbers, the global multinationals who drive the extractive industries and world spanning supply chains are being forced to declare whether their profits are built on the back of slave labour. The EU is bringing in a whole raft of non-financial reporting disclosures on everything from board diversity to respect for human rights. The rise of the integrated report, and focus on the triple bottom line, reflect the calls of stakeholders to understand more about the motivation behind the numbers, and where they might be taking us.

So how are accountants supposed to respond?

What we cannot ignore is that society wouldn’t exist without business. From the very first time someone realised that if you measure and record the grain going into the granary then you can identify, allocate and trade the productive surplus of society we became reliant on numbers. Fast forward a couple of thousand years to the development of the corporate entities which underpin the fabric of the modern world, and methodologies for monitoring the behaviour of owners and managers by other owners and by creditors are essential to the health of the Corporations which allow for the use of investors’ capital, opening up opportunities for achievements and returns that would otherwise be unattainable. Society is built on business, and business is built on trust in the business forms and business relationships which the numbers and narrative encapsulate.

The speed and size of modern markets, modern transactions, can’t change the underlying reality that society is made up of humans, some trustworthy, some trusting, some neither. Society still needs assurance that the individuals managing and controlling the flow of productive capability are doing it not just in their own interest, but with the broader good in mind. Accountants are indispensable for giving investors that trust in business.

Whether it’s the numbers in the back half of the accounts or the narratives we read in the front half of the accounts, it’s accountants in their role as auditors who sign off on the company reports. And increasingly it’s the real time operation of the business which concerns stakeholders. Who is better placed to analyse the data, to balance the likely impacts of the external environment, to critically assess and balance the competing pressures which assail the modern business?

However ethically pure an organisation’s motives, it won’t survive without a realistic view of the numbers and how they fit into the supply chain – and that’s a view which has to come from a trained and experienced mind. An English idiom, highlighting that actions are better than words, describes this situation well: “fine words will butter no parsnips” – and good intentions will balance no statements of financial position.

The world needs ethical and professional accountants, taking the wider view of business that society demands, and nothing can take the place of that ability to work with the numbers. What accountants need to do now is show how their talents and training fit into the modern economy in a way that no other skillset can emulate.

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By Jason Piper, tax and business law manager, ACCA

Shortly before disappearing under the avalanche of consultations, discussion papers and reviews that have been spawned by Summer Budget 2015, I managed to grab copies of the four offshore evasion condocs and have a read through. They make up an interesting complementary suite of proposals with some common threads but also some interesting differences.

The proposals all come from the same team, who clearly (shock horror) talk to each other about what they’re trying to achieve and how best to do so. They also talk to people outside the Treasury building, and I know from being involved in some of those discussions that they combine a healthy dose of pragmatism with a genuine passion to stamp out abuse of offshore arrangements. They recognise that actually most offshore work is legitimate, and most advisers want nothing to do with criminal activity. Let’s face it, another way of saying “offshore” is “all the rest of the world”, and there’s quite a lot of that which isn’t tax evasion.

The paper on civil sanctions for enablers of offshore evasion explicitly notes a desire to work closely with the professional bodies to help their members avoid the risk of entanglement with the new sanctions. That’s a move that we welcome too, and we look forward to helping generate and publicise the educational materials to help prevent advisers being duped by others.

Of course, there are advisers who deliberately set out to help their clients evade tax. Up until now, there’s been a gap in HMRC’s powers to deal with such advisers, and it’s that gap which many of the current batch of proposals seek to plug. But, on comparing the ‘civil sanctions for enablers’ proposals to the ‘criminal sanctions for facilitators’ proposals there was one key point which stood out the more I realised it wasn’t there.

Civil sanctions are proposed for advisers where a penalty has been levied on their clients. Fair enough; there’s a proven offence, and everyone involved should be dealt with. But the “criminal sanctions” seems to skirt around the whole issue of when it gets triggered. It might be that when it talks about evasion that’s shorthand for “evasion which we know has happened because there’s been a criminal prosecution for it”. (The rest of the “criminal” document is couched in similar legal shorthand – for example, it uses the term mens rea where the “civil” document tends to talk in terms of “state of mind”; nothing wrong with either approach, depending upon your audience.)

But then again, there are areas in the “criminal” consultation where it refers to “circumventing international tax transparency agreements” as being an evil worthy of remedy, and which potentially could spark the criminal prosecution of advisers involved in it. We’d agree that it needs dealing with – but there’s a catch here.

The proposed new criminal offence is, well, criminal. It’s a significant step to take, accusing anyone of criminal activity. And when the French authorities recently investigated a similar mechanism they found it failed on a constitutional fundamental – you can’t criminalise people for assisting in behaviour which is not, itself criminal. Or in other words, there must have been a successful criminal prosecution of the underlying offence before you can go after the facilitators. And that is what may be the stumbling block for HMRC in the UK. They desperately need more, experienced, resources if they’re going to successfully prosecute the tax evaders themselves – because without those prosecutions, the criminal offence of facilitation will be a pointless piece of legal posturing, a deterrent that will never be used.