Tory MP Charlie Elphicke recently caused a great deal of upset amongst his former colleagues in the legal profession with his criticism of professional advisers working in the field of tax planning. The normally staid website version of The Law Society Gazette was inundated with comments about the story including one asking if the MP is “insane or just plain stupid”.
Elphicke wants lawyers advising on financial strategies having no purpose other than to create a tax advantage to face summary prosecution. Other offences similarly subject to summary prosecution in the UK include Common Assault and Fear or Provocation of Violence.
As with those offences Elphicke believes this is a question of morality. Interviewed by The Times he said he wants to see the UK reach “a point where, at a dinner party, if somebody tries to boast that they’ve secured millions of pounds in tax savings for a client, people don’t just smirk and think it’s funny.” In order to achieve this he believes one “shouldn’t just go after the client, [one] should go after the person who advises them.”
Elphicke may want to direct his fire at a particular lawyer who co-wrote an article for Taxation Magazine back in November 2005. That author, then partner and head of tax, employee benefits and share incentive plans at law firm Reed Smith, was commenting on new National Insurance legislation tabled by the Labour government of the day. The stated reason for the new law was to put a stop to what that government considered a malign tax avoidance industry.
The article said that the change to the law raised the question “what constitutes avoidance and where the line between avoidance schemes and ‘innocent’ schemes should be drawn,” further highlighting that there was “no simple, stark, clear cut division between legitimacy and illegitimacy.”
It went on to ask who the proper judge of whether something is considered unacceptable avoidance should be, warning against an arbitrary and unconstitutional application of such a test by the Treasury basing its findings on “morality rather than practicality.”
The authors defended what others saw as aggressive tax avoidance – “the behaviour is not evil or immoral, it is a rational change in behaviour resulting from the micro-economic tinkering of which the Chancellor is so proud…We should be slow to let the Government sanctimoniously lecture us for what we do when it tilts the table…The sultans of spin may claim that the behaviour is immoral, but we know it is more complex than that.”
How Charlie Elphicke MP must seethe when reading the words of those tax advisers who singularly fail to grasp the morality of his crusade. Perhaps the authors should be first in line for prosecution when the Tax Inquisition is up and running.
The only problem is that the senior author is no longer in legal practice, he is in fact the Member of Parliament for Dover, one Charlie Elphicke MP. The anger of his former colleagues in the legal profession is understandable.
Fortunately for all, the authors of the article did offer a solution – “the best way to stop tax avoidance is to lower the rate of tax and stop the micro economic tinkering” – sane and wise words.