The Solicitors Regulation Authority (SRA) has published a warning that solicitors involved in promoting and implementation aggressive tax avoidance may be subject to disciplinary action.
Details are in a warning notice and accompanying news release on the SRA website: see Solicitor tax work facing greater scrutiny
The SRA is concerned that some solicitors are facilitating tax avoidance schemes aggressively in ways that go beyond the intentions of Parliament. The warning notice reminds solicitors of the principles they should uphold when advising clients on tax planning, such as upholding the rule of law and proper administration of justice, acting with integrity and acting in the client's best interests. The SRA goes on to say that solicitors should also behave in a way that maintains public trust: where solicitors have advised on schemes that are “judged to be illegal” (in short, failed tax avoidance schemes), the SRA will see this as prima facie evidence of misconduct.
Tax Faculty comment
On 18 March 2015 the government set out a challenge to the tax profession to strengthen their professional rules to help stop aggressive tax avoidance schemes. ICAEW and the six other bodies that publish the pan professional code of conduct in relation to taxation (the PCRT) responded to this challenge by publishing an updated PCRT effective from 1 March 2017. The updated PCRT included five new standards to supplement the existing fundamental ethical principles which clarified what is expected of members when providing tax advice and made it clear that certain types of aggressive tax planning were not acceptable.
Discussions with the legal profession have continued and the SRA’s note reflects the response of the solicitors’ regulatory body to the government’s challenge. Given that the SRA has its own detailed rule book it was unlikely that it would just adopt the new standards included in the PCRT. While the PCRT has not been adopted as such, the note welcomes the PCRT and says that “These standards reflect our own principles, particularly that solicitors must be honest and act with integrity, and uphold the rule of law.” The clear implication is that the principles in the PCRT are on a par with those standards implicitly expected from solicitors.
The strongly-worded warning contains some comments that are surprising, for example it says that when advising a client on a tax avoidance scheme that fails “you will leave yourself open to the risk of disciplinary proceedings as well as committing a criminal offence [our emphasis]”. This appears rather sweeping and may need further clarification.
In summary, while the SRA has adopted a different approach from the PCRT bodies, it has by and large ‘endorsed’ the PCRT and, taken as a whole, the note carries a strong warning that will leave solicitors in no doubt that if they are involved in implementing a tax avoidance scheme that fails, they are likely to be subject to disciplinary proceedings. In a similar manner to the PCRT it reaffirms the important role of law firms and solicitors in helping taxpayers meet their legal obligations and that the public needs to have trust in the profession.
We wait to see whether the Bar Standards Board will be updating its own handbook to reflect the government’s challenge and, more generally, how the government intends to address the 30% of agents who are not affiliated to a professional organisation.
“These standards reflect our own principles, particularly that solicitors must be honest and act with integrity, and uphold the rule of law.” No. Those standards do not go nearly as far as our PCRT. It is sad that even the Law Society has become confused about the difference between 'illegal' and 'undesirable'. The rule of law in the UK these days is barely worth upholding. Very sad.