Taxing matters



HMRC once advertised that “tax isn’t taxing”, which is catchy but untrue. 

Regardless of the rights and wrongs of the KPMG case, it has almost certainly arisen because tax is complicated, because the tax rules are frequently not clear and because the tax code doesn’t always fit easily with the reality of commercial transactions. 

We don’t really know what happened in this case but it’s not surprising that things go wrong occasionally.

So what can we advisors do to mitigate our risk? 

Firstly, only advise in areas where you are competent to do so. While KPMG has teams of people covering every aspect of the tax code, we don’t. If you’re asked to advise outside your comfort zone, you should either decline or insist on getting advice from an expert; don’t try and wing it! 

Secondly, make sure your client is aware of any risk areas, so that they have been properly warned about the risk and the tax at stake. If appropriate, consider a non-statutory clearance from HMRC or a formal opinion from a tax expert, to reduce the risk as far as possible. 

Even an expert opinion can’t guarantee the tax position, as we saw in the recent M Group Ltd case (TC08054), where Counsel’s opinion didn’t persuade (and nor did my article in Taxation). But specialist advice can prevent you from getting it wrong and should eliminate the risk of a penalty for a carelessly incorrect return. 

At the end of the day, however, mistakes are made, simply because tax is taxing, and that’s why we all carry professional indemnity insurance!

 

Extract of the article by Mark Taylor for AccountingWeb. Read the entire article by clicking this link (May 2021).

(Photo by BalkansCat, Getty Images)