If you are self-employed and/or run a business, tax is probably something your tax adviser (often your accountant or independent financial adviser) helps you with. Tax advisers should, and usually do, help you to find the best tax products for your business, i.e. those that will limit the tax you pay while ensuring that any tax scheme is not deemed to be evading tax. However, what if this is not the case and you’ve been mis-sold a tax avoidance scheme or a mistake has been made?
Tax avoidance schemes are measures that seek to utilise tax legislation to minimise the payment of tax in a way which was not intended by the legislation, but which is not contrary to the legislation. They are much more prominent and attempt to take advantage of the grey areas in legislation.
As with most financial products, they carry with them some risk. It is the job of your tax adviser to ensure you are aware of the risks, so that you can make an informed decision about which option(s) to pursue.
What Problems Can Occur with Tax Avoidance Schemes?
The problems arise if/when HMRC decide that the tax scheme is not legitimate or legal. If this happens, you can be required to pay back the tax you thought the scheme had saved you and other charges.
Tax advisers and fund managers can occasionally put forward proposals that sail rather close to the wind. Sometimes these individuals work on commission or bonuses, so their interests might not necessarily be based upon furthering your interests.
In addition, even those acting entirely in good faith can make mistakes.
If a mistake occurs, or you were mis-sold a tax avoidance scheme, you could find yourself facing a HMRC investigation. Not only is this stressful and time consuming it can also be accompanied by a demand from HMRC for payment on account of tax they say you should have paid but did not pay. As well as this, you can lose the tax advantages of the scheme immediately and be required to pay back the tax savings that arose from the scheme. Sadly, you do not necessarily get the benefit of the doubt while the matter is investigated.
If you are asked to pay up and cannot do so, significant financial penalties can arise.
What are Your Options?
If you are facing a HMRC investigation and/or a demand for advanced payment, you might query how your tax adviser let you get into this predicament. If you think they failed to advise you properly or mis-sold you a product without explaining the risks, they may have been negligent and you could potentially make a claim against them.
If you suffer a financial loss as a result of their negligence, you have six years from the date of the negligent act to pursue a claim. Alternatively, you have three years from the date when you learned of their negligence – whichever date is the later.
Suing a tax adviser, in particular proving they acted negligently, can be difficult. If you are considering suing a tax adviser for negligent advice, you should not delay in contacting specialist professional negligence solicitors. The longer you delay, the more memories can fade, and vital evidence may be lost. If you wait until the last minute, you may even find that you have to issue a claim before your legal team have been able to get to the bottom of whether your case has merit.