Insiders 'help firms avoid taxes'

£20 notes

Big accountancy firms are using "insider knowledge" gained from staff seconded to the Treasury to help companies and wealthy individuals avoid paying UK taxes, MPs warned.

The Commons Public Accounts Committee said it was "very concerned" at the way the "big four" firms - Deloitte, Ernst and Young, KPMG, and PwC - were able to exploit loopholes in the tax laws.
%VIRTUAL-SkimlinksPromo%
Committee chairman Margaret Hodge said the practice represented a "ridiculous conflict of interest" which should be banned. "The large accountancy firms are in a powerful position in the tax world and have an unhealthily cosy relationship with government," she said.

The committee warned that HM Revenue & Customs (HMRC) was engaged in a "battle it cannot win" in seeking to stem the losses to the Exchequer from tax avoidance. It had far fewer resources than the big four firms which employed almost 9,000 staff and earned £2 billion a year from their tax work in the UK.

The committee particularly highlighted the way the firms seconded staff to the Treasury to advise on technical issues in the drafting of legislation only for the individuals concerned to return to advise clients on how to use those laws to avoid tax. "Through their work in advising government on changes to legislation they have a detailed knowledge of UK tax law, and the insight to identify loopholes in new legislation quickly," it said.

It gave the example of KPMG whose staff advised on the development of "controlled foreign company" and "patent box" rules, and then issued marketing brochures highlighting the role they had played. The brochure "Patent Box: what's in it for you" had, it said, suggested the legislation represented a business opportunity to reduce UK tax and that KPMG could help clients in the "preparation of defendable expense allocation".

The committee said it was "inappropriate" for individuals from firms to advise on tax law and then devise ways to avoid the tax.

"We have seen what look like cases of poacher, turned gamekeeper, turned poacher again, whereby individuals who advise government go back to their firms and advise their clients on how they can use those laws to reduce the amount of tax they pay," it said. "We are ... very concerned by the way that the four firms appear to use their insider knowledge of legislation to sell clients advice on how to use those rules to pay less tax."

While the firms insisted they no longer sold the "very aggressive" avoidance schemes on offer 10 years ago, the committee said they had simply moved on to offering other forms of tax avoidance advice. It said they still offered schemes with as little as a 50% chance of succeeding if challenged - suggesting a willingness to take advantage of HMRC's need to weigh the risks of becoming involved in protracted legal battles.

An HMRC spokesman said: "Backing HMRC's success, last year the Government announced further investment of £77 million to expand our anti-avoidance and evasion work and much of this will be used to accelerate our challenges to multinationals' transfer pricing arrangements and is expected to bring in an additional £2 billion over the next five years."

5 PHOTOS
Tax tricks to improve your wealth
See Gallery
Insiders 'help firms avoid taxes'

If you wear a uniform of any kind to work and have to wash, repair or replace it yourself, you may be able to reclaim tax paid over the last four years. For some people, this could mean a windfall worth hundreds of pounds

The interest you receive on savings accounts (with the exception of cash Isas) is automatically taxed at a rate of 20%.

Higher-rate taxpayers therefore tend to owe money on the interest they are paid throughout the year. If, however, you are on a low income or not earning at all, you should be able to claim all or some of the tax deducted back

You can apply for a refund of vehicle tax if you are the current registered keeper or were the last registered keeper of your vehicle that no longer needs a tax disc

If you pay tax on a company, personal or State Pension through PAYE (the system employers use to deduct tax from your wages), you may well end up overpaying

There is a limit to the amount you need to pay in NI, whether or not you work for an employer.

Instances in which you may find that you have overpaid include if you work two or more jobs and earn more than £817 a week and if you move from self-employment to employment, but continue to pay Class 2 National Insurance contributions

HIDE CAPTION
SHOW CAPTION
of
SEE ALL
BACK TO SLIDE

More stories

© 2013 Press Association
Read Full Story

FROM OUR PARTNERS