According to the ICAEW (Institute of Chartered Accountants in England and Wales) the body regulating solicitors in the UK, the SRA (Solicitors Regulation Authority), has published an official warning to its members, cautioning that any who are involved in promoting and implementing aggressive tax avoidance schemes may be subject to disciplinary action.
The SRA’s concerns apparently have been fostered by some law firms and individuals who have been promoting aggressive tax strategies that “go beyond the will of Parliament”.
In the warning, solicitors are reminded of the principles they should maintain when giving clients advice on tax planning. These include upholding the rule of law, ensuring the proper administration of justice, acting with integrity and in the best interests of the client. The SRA then goes on to say that solicitors should behave in a way that engenders public trust, and that when they have advised on schemes that subsequently turn out to be illegal, then it will, prima facie, be regarded as evidence of misconduct.
The sternness of the warning has come as a surprise to some observers, particularly the use of language that cautions that advising a client on a tax avoidance scheme that fails “will leave yourself open to the risk of disciplinary proceedings as well as committing a criminal offence”.
Back in 2015, the government challenged the tax profession in the UK to stop aggressive tax avoidance schemes by strengthening their professional rules. In response, an updated PCRT (Professional Code of Conduct in relation to tax) was published in March 2017 by the ICAEW and six other professional regulatory bodies, introducing new standards to supplement existing fundamental ethical principles. These clarified what was expected of members when providing tax advice, and made it clear that the endorsement and promotion of certain aggressive tax avoidance schemes was not acceptable.
Whilst the SRA is not one of the PCRT bodies, its latest warning is a stark reminder that solicitors are expected to adhere to a certain level of conduct, and that law firms and solicitors have an important role in ensuring that taxpayers meet their legal obligations, and ensure that the public has trust in them.
More widely, it is further illustration of the way the whole regulatory climate around tax planning has changed. Not only is tax evasion now a crime; aggressive tax planning is also being outlawed. Professional advisors and clients need to acknowledge and accept this.