Ray McCann, partner at Pinsent Masons, said the powers, which are aimed at cracking down on the promotion of tax avoidance schemes, will “publicly stigmatise” tax advisers and their clients.
“These rules will mean that tax advisors struggle to win new clients and carry on business,” he said.
“They will also put the clients of these tax avoidances at a very significant disadvantage as HMRC will have a specially extended time period in which to investigate those clients.”
He added that HMRC will be able to apply these rules before any tribunal or court has considered the legality of the tax planning scheme being promoted, raising issues surrounding the infringement of human rights.
“£1m fines are a sudden and unprecedented escalation of the sanctions that HMRC have against promoters of tax planning schemes and again make clear the determination of the Government to prevent abusive tax schemes.”
The proposals, published in the Finance Bill and expected to be implemented later this month, will allow HMRC to force tax planning companies it is monitoring to state on their website and in all communications to present and prospective clients that it is being monitored by the Government body.
The body will also make it a criminal offence for advisers to dispose of any documents relevant to their fine.
If the adviser fails to meet these requirements then they can face a fine of up to £1m.
‘Electronic tag’
McCann added that although HMRC will not issue a £1m fine for a tax adviser’s first offence it will be able to do so if an adviser continues to promote schemes that the body view as avoidance.
He said the proposals have come at the wrong time, as avoidance is not as big an issue as it has been in previous years.
“I think it is just a little bit late, the problem does not exist in the same way it did,” he said. “If [HMRC] starts to use the powers in a way that makes normal advisors feel watched then they will create problems.”
“It wants users to go in with their eyes open; people in the market will not want to carry on with the feeling that they have an electronic tag round their ankle and customers will not want to take risks.
The remarks are just the latest in a long string of recent criticism aimed at HMRC.
Last month, Neal Todd, partner at international law firm Berwin Leighton Paisner, said proposals allowing the Government body to charge contentious tax payments up front were “unconstitutional”.
He said the proposals were a “sticking plaster” to wider tax problems, and suggested a reform to the current tax system as an alternative solution to tax avoidance.
