Positive progress for PCRT, but further clarification needed from HMRC

Monday was so-called ‘Legislation Day’ when Government issued 398 pages of draft clauses, explanatory notes, tax legislation and rates. Amongst the bundle, we discovered that HMRC has made extensive changes to the provisions in the discussion document published in August on fines for tax avoidance enablers and many of the concerns that we raised have been addressed.

In particular, for the first time the Government has included a helpful reference in the summary of responses document that the provision will not normally apply to a professional member operating under the Professional Code Relating to Tax (PCRT). I believe that, even if not in legislation and subject to some conditions, it is a ‘win’ and helps strengthen our position in relation to the publication and adoption of the revised PCRT.

As you are already aware, ICAEW, along with other leading UK accountancy and tax bodies, published an update to PCRT on 1 November with implementation from March next year. It sets out how tax advisers and agents should act in difficult situations. The guidance has been endorsed by HMRC and sets out clear professional standards in relation to the facilitation and promotion of tax avoidance. The PCRT has been in existence for over 20 years and is regularly updated. It sets out the high ethical standards which form the core of the tripartite relationship between tax adviser, client and HMRC and supports the key role members play in helping clients comply with their tax obligations and their broader responsibilities to society.

In a welcome development, HMRC has also announced in its summary of responses that the Government does not expect that ‘members acting wholly within the spirit’ of the new Standards contained within Part 2 of the PCRT should normally be subject to the enabler provisions. While we need to clarify ‘acting wholly within the spirit’ of the PCRT, nevertheless this is good news.

For the first time the Government has provided an explicit statement that provides a degree of protection against the application of this new penalty where a person is a member of a professional body signed up to the PCRT. Thus, ICAEW members acting in accordance with the PCRT (and of course members of the other signatory bodies) would not normally be subject to this potentially punitive penalty. We believe that this is a longed for first step by Government in recognising the value of a professionally qualified adviser in supporting tax compliance and that this is something to be encouraged. The announcement is likely to enhance the status of the PCRT and membership of one of the signatory bodies to it and I would urge members to make sure that they read the PCRT.