Calls for HMRC to stop using outside firms to advise on tax laws

The Momentum UK Team 27 April 2013

The Commons Public Accounts Committee (CPAC) has called for a ban on accountants who work for both HMRC and private clients to prevent them from passing on inside details on complex tax loopholes.

The CPAC warned that private accounting firms who were working with the government in an advisory capacity, may be using “insider” knowledge to help private clients such as businesses avoid tax.

The report from the CPAC said:

"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."

The so called “big four” firms that have advised the government on the making of tax laws, include Deloitte, Ernst and Young, KPMG, and PricewaterhouseCooper; together they employ around 9000 members of staff and earn around £2 billion through tax work in the UK.

Describing the practice as a "conflict of interest", Margaret Hodge, the CPAC chair said:

"The large accountancy firms are in a powerful position in the tax world and have an unhealthily cosy relationship with government."

The report from the CPAC said:

“Confidence in our tax system can only be maintained if every company and every individual is seen to be paying their fair share of tax.”

In response to the report HMRC released a statement highlighted that the government have already announced an additional investment of £77 million to expand the “anti-avoidance and evasion work”. The statement said:

“The facts show that we are not only aggressively fighting battles against tax avoidance, but we are winning them.”

“Since the end of 2012, we have won 11 Tax Tribunal cases against avoidance schemes, two of which were against large corporates. In the last three years alone, we have litigated more than 50 major avoidance cases, protecting billions of pounds of tax in the process.”