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Tax advisers face flurry of claims after HMRC crackdown

  • 19/04/2013
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Tax advisers face flurry of claims after HMRC crackdown
A spate of professional negligence claims have been lodged against the promoters of tax avoidance schemes - including advisers - following a clampdown by HM Revenue & Customs (HMRC), according to Reynolds Porter Chamberlain (RPC), the City law firm.

The claims are being made by individuals who took part in tax avoidance schemes that date from 2005 to 2007, when a lot of schemes were set up that are now being challenged by HMRC.

Individuals who have been contacted by HMRC and agreed to pay the disputed taxes and interest are trying to recoup their losses by claiming that their advisers or the scheme’s promoter gave them negligent advice in recommending or introducing the scheme to them.

Defendants to the claims include boutique tax advisory firms, accountancy firms and financial advisers, according to RPC.

Robert Morris, partner at RPC, said HMRC is poring over many of the tax avoidance schemes that were set up before the financial crisis.

“It is taking a very aggressive approach towards individuals and is frightening many of them into paying the disputed tax, without having to show that the tax is lawfully due.”

“Rather than challenging HMRC and saying that the tax scheme worked, many individuals are deciding to pay up and then trying to recover their money with a negligence claim,” he said.

“A lot of professional indemnity insurers are concerned that some of the negligence claims they are being notified of are shaky at best. We urge them to consider defending the growing number of claims robustly. “

RPC said claimants are arguing that the promoters of the schemes did not do enough due diligence when promoting the scheme, and gave them insufficient warnings as to the risks of an HMRC enquiry.

There are also claims that the schemes were inappropriate for the individuals to whom they were sold and should not have been recommended to them in the first place.

RPC said many of the claims it has seen are unlikely to succeed because they are either time-barred, have been launched with the benefit of hindsight or are yet to be considered by the tax tribunals.

Morris said: “Before the credit crunch many of these schemes were sold and never challenged by HMRC. If the promoter properly explained the risks as they were at the time and the individual decided to take part, it’s going to be very difficult for them to say they were badly advised.”

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