TAX affairs can tax even the sharpest mind.
Traditionally, the best way of finding a safe route through the minefield of tax policy was to beat a path to your closest professional adviser. After taking their advice, you could sleep safe at night, knowing you had fulfilled your duty as a taxpayer.
Many people whose lives have been ripped apart by the loan charge scandal have cursed the day they listened to these apparently well-informed professionals.
When I spoke to Sir Amyas Morse - who led the review into the loan charge - some of his harshest words were directed at those who were continuing to market loan schemes.
The Treasury’s decision to announce changes to the loan charge and the independent review’s conclusion that it caused serious distress is a vindication of everyone who believes this controversial policy was flawed.
Much of the criticism has been focused on the conduct of HMRC. But Sir Amyas also believes a new strategy is needed to examine intermediaries, whose role in the loan charge saga deserves close attention.
He said: “It’s outrageous people are giving advice to individuals who don’t have a sophisticated understanding.”
Sir Amyas slammed the “reprehensible” behaviour of promoters and professional advisers who are continuing to sell loan schemes, despite knowing they will not deliver the tax benefits promised.
Sir Amyas found that the tactics used by promoters included misrepresenting the DOTAS (disclosure of tax avoidance schemes) system to claim that schemes had been approved by HMRC, or providing opinions from Queen’s Counsel suggesting that HMRC would be unsuccessful if they tried to claim the tax.
Sir Amyas said: “The loan charge was intended to shut down loan schemes, but the review found there were more first-time users in 2017-18 (over 6,000) than in any year dating back to 1999-2000.
He added: “Scheme usage continues to be extensive in the 2019-20 tax year to date, with over 8,000 individuals having entered into loan schemes between April and October 2019.
“A key driver of ongoing scheme usage is a limited number of promoters and professional advisers who are selling schemes in spite of knowing that they will not deliver the tax benefits being promised.
“Whilst the review has set out its position that responsibility for tax affairs must ultimately rest with the individual, it is to be expected that people will want expert advice on their tax affairs, and will turn to professionals for that advice.
Sir Amyas added: “The review considers that the continuing marketing of loan schemes on the basis of tax benefits associated with them, given the clear legal position, is reprehensible.”
This statement tallies with evidence I’ve received over recent months. Everyone who has contacted me said they got involved with loan schemes after taking professional advice. They had no desire to avoid their responsibilities as taxpayers. Far from it. One businessman who contacted me said: “Like many I employed a certified and registered accountant to advise my business.
“He advised the use of loan schemes as a way to mitigate tax in an effective and legal way. As soon as I learnt about the legislation effectively closing these schemes I withdrew.”
However, he added: “I followed the advice of experts ALL along – in entering the schemes, reporting my participation and then in the challenging of HMRC.
“My accountant advised me the schemes were not DOTAS, as advised by the scheme’s legal counsel in discussions with HMRC, and therefore we did not disclose on my tax return.
“I am now being penalised for simply following the advice given to me and followed in good faith. I will personally be destroyed by the loan charge.”
So let me throw down the gauntlet. What action are the regulators and professional bodies taking to discipline the “reprehensible” advisers at the heart of this scandal? Without effective sanctions, how can anyone place their trust in the professionals ever again?