Filling the UK Fiscal Gap – the Pressures on Professional Firms PrimeGlobal – EMEA English Speaking Conference July 2014

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PrimeGlobal Birmingham UK Conference 4 th /5 th July 2014 Filling The UK Fiscal Gap - The Pressures on Professional Firms

What I Am Going To Talk About  2008 Economic Black Holes to Fill  How Tax Collection Has Become Relevant  Methodology Worldwide  Initiatives  Growing Pressures on Professional Advisers

2008 Black Holes  Impact on Government Finances Worldwide  Deficits to be filled  Real Losses  Contracting Western Economies  Faith in Capitalism/globalisation undermined  Further Exacerbating Problems  Reduced Tax Collections  Need to Fill Black Holes

Relevance of Tax Collection (1)  Worldwide Recognition of Relevance  General Trend of Rates of Tax Downwards 2006 – 2014: -US average down by approx 3% -EU average down by approx 3.5% -OECD average down by approx 3.6% -Global average down by approx 4% -UK down by 9%  Reduced Economic Activity  Increased Focus on Tax Collection  Increased Focus on Outdated Rules

Relevance of Tax Collection (2)  Increased focus on Collection  Increased focus on Enforcement  Increased focus on International Groups/BEPS  Increased focus on outmoded rules  Increased focus on Tax Revenue sharing  Increased focus on Government Cooperation  Increased Focus on Avoidance/Evasion

Techniques (1)  Muddying water between Avoidance/Evasion  Introduction of Morality Tests  Emotional Parliamentary Debate  Encouraging Public Outrage  Role of Media Debate  Introduction of “Scapegoats”  Hardening HMRC Line

Techniques (2)  Extending Anti Avoidance Rules  GAAR  Increased Subjectivity  Increased Powers to HMRC  Increased Pressure on Professionals

Techniques (3)  Increased Focus on Multi Nationals  Increased Focus on Tax Havens  Increased Focus on Controlled Foreign Companies  Increased Focus on updating OECD Rules  Increased Cooperation between OECD and G20 countries

Techniques (4)  Pressure on Past Evasion to fill Black Holes  Collection of Unpaid Taxes  Increased Penalties  Interest  All Helps!

Initiatives (1)  Use of Whistleblowers – Offshore Bank Accounts  Amnesties  Reduced Penalties for Disclosure  Extending Governmental Cooperation  Signing of New Agreements  Applying Exchange of Information DT Treaties  Provision for Payment

Initiatives (2)  HMRC increased aggression on Tax Schemes  Applied to : -Taxpayers -Scheme Pedlars -Professional Advisers

Pressure on Advisers (1)  More Aggressive HMRC  Loss of Public Support  Media/Public/MP finger pointing

Pressure on Advisers (2)  Money Laundering Rules – between a rock and a hard place  Need for Specialist/Experienced Tax Investigation skills  Briefing/Cautioning Clients  Form of Tax Contracts  Fees/scoping

Pressure on Advisers (3)  Derrin Brother v HMRC – Advisers Forced Disclosure to Australian Tax Authorities  Mehjoo v Harben Barker - Case where Taxpayer sued Adviser over Tax Scheme failure.  ICAEW – Tax Guide 02/14 – Professional Conduct in relation to Tax – new guidance

Conclusion  No Quick Fix for Black Holes  Pressure unlikely to reduce  Need to De-risk wherever you can  Requires greater caution by Advisers  Greater Need to Consult Colleagues

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