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Half of IFAs “morally wrong” in Prime Minister’s eyes

Successive governments have changed the goalposts so often that what it is safe to advise a client to do is no longer clear.

By Thomas McMahon, Reporter, FE Trustnet Follow
Sunday July 15, 2012


IFAs who advise clients on tax avoidance schemes are on thin ice, according to industry experts, who believe the threat of retrospective changes to the law is too big an issue to ignore.

ALT_TAG The issue hit the headlines after comic Jimmy Carr was pilloried in the press for using a Jersey-based scheme to avoid paying income tax.

According to the latest FE Trustnet poll, almost half of IFAs believe that "operating within the law" is enough when it comes to advising clients about their tax affairs. 

However, a host of experts have warned that in the current regulatory and social climate, perfectly legal tax avoidance schemes could be attacked by the authorities in the future, adding to the complexity of the decision on how to advise.

ALT_TAG Chris Spear (pictured left), managing director of Spear Financial Services, said: "I’ve been in the industry for a couple of decades and I have used tax avoidance products in the past, but I wouldn’t do so again." 

"The reason is the changing attitude and legislation of the Government." 

"It started when Gordon Brown moved against double-trust arrangements. It was the first time the Government had used retrospective tax changes, so people realised that you can use tax dodges now but it’s not over until it’s over." 

AWD Chase de Vere’s Patrick Connolly added: "Investors who want to push the boundaries are taking a huge chance that what they are doing may be legal now but may not be acceptable in the future." 

Juliet Schooling-Latter (pictured right), head of research at Chelsea Financial Services, thinks for many people the threat of public disgrace may be more of a deterrent than any legal repercussions. 

ALT_TAG "I think people are more worried that they will be the next to be named and shamed rather than whether what they’re doing is immoral," she said. 

Of the 283 investment professionals who responded to the poll, 52 per cent said advisers should be guided by morality when advising clients, while 48 per cent said following the law is enough. There was a similar result in a poll of private investors, which had a 53/47 split. 

"I have come round to the view that you must always play it straight and play it simple," continued Spear. 

"There are some things you can do that aren’t very controversial, not from a moral point of view but from the point of view of your client being able to sleep at night without worrying about retrospective law changes in the future." 

"If clients come to me with a scheme that seems legal but I can’t see all the risks, I would always get them to sign a disclaimer and make it clear they are taking responsibility." 

 Connolly (pictured) said: "As a starting point the adviser has to be within the law."

ALT_TAG "That said, in all circumstances, the advice should be tailored to the requirements and the wishes of the client, so at one extreme they will be very ethical, but at the other extreme there will be clients who are willing to be more adventurous in terms of risk." 

"Advisers usually should be urging them away from risk, but if the client is clear about what he wants to do and the risks are explained to them, they have responsibility." 

"Most people try to be too clever and perhaps Jimmy Carr did that too," he added. 

Schooling-Latter added: "It was harsh for Jimmy Carr in the press, I felt sorry for him. He was doing what a lot of other people were doing." 

"If you ask the average man in the street if they want to pay more tax they would obviously say no. Having said that, it was obviously wrong that he was paying so little." 

"I think the fact that people are thinking about this now means people are very aware they have a moral responsibility to pay a reasonable level of tax. Investors need to be aware of the public mood."



 
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Manny Feek Jul 20th, 2012 at 02:11 PM

Is it "Morally Wrong" for a Barrister to defend a Client he knows is guilty?
No, he works within the Law to ensure the best result for the Defendant. Sound familiar?

Reply
westey33 Jul 17th, 2012 at 03:19 PM

The question of 'morals' is an interesting topic that the politicians have brought to the fore. Given that they were and may still be fiddling their expenses they appear to have left both morals and legality to one side. Is it a case of one rule for them and one for the rest? I personally feel operating within the law is moral. Claiming false allowances, benefits and sick pay is not. Time to target the benefit fraudsters and their own 'moral' doings before they tackle the 'law abiding'

Reply
george Jul 17th, 2012 at 08:08 AM

If an IFA does not provide legally correct advice about minimising tax liabilities, then surely the client would have grounds for redress. The only caveat would be to preface their advice with warnings about the threat of retrospective advice. I speak as one who finds the likes of Philip Green, Ebay, Northern & Shell (aka Express newspapers), as morally repugnant. Does anyone actually read the Express, as they have no moral authority.

Reply
Sweetypie Jul 16th, 2012 at 09:42 PM

Retrospective legislation is the hallmark of lazy government.

Our legislators are expected to draft laws properly in the first place. They may, of course, subsequently amend the legislation to cover future behaviour, but they have no natural right to penalise citizens who have operated within the law in the past.

Retrospective legislation is the road to tyranny!

Reply
Peter Ginger Jul 16th, 2012 at 04:25 PM

I did a quick straw poll in the office and of the 10 advisers not one writes dodgey tax avoidance business, on that basis there a re alot out there making up the. From my perspective I would be scared witless that a case that made good money cost us our PI cover!
PeterIFA

Reply
SnowWhite Jul 16th, 2012 at 03:18 PM

So it would appear that now the battle rages between the 'weasels' and the idiots'! So because someone other than himself does not volunteer to underwrite the profligate spending of irresponsible politicians, they must by definition be immoral eh? No matter whatever his opinion, the ‘dues’ that he considers belong to society are no other than those that are those specifically defined by law. The claim for and payment of tax has never been and never will have a moral component. It is merely the exploitation of those competent to provide for themselves by those who are not. That this latter group take it as their ‘right’ to enjoy the fruits of others labours, could just as easily be adopted as a justification for th

Reply
Frank Dennis Jul 16th, 2012 at 12:35 PM

The last thing both recent Governments should be doing is preaching to us about morality. Dipping their hands in our pockets to fund the Money Advice Service and FSCS when we have no say in the matter is not morally justifiable.

Reply
David Parkinson Jul 16th, 2012 at 10:45 AM

I think you will find that 'Tax Accountants' are the ones who manipulate the HMRC rules. Time to stop blaming IFA's for all & look at others. If these scemes did not exist then IFA's could not use! What are HMRC doing allowing them if that's the case. However it is a bit rich for the PM or any MP to preach about Morals!

Reply
Steve Jul 16th, 2012 at 10:35 AM

Within the law is all we have to consider in my opinion as who am I to judge another mans morals and I do not think the Government will apply wholesale retrospective tax changes as the result would be widespread confusion and how could people and business plan their Tax and Business affiars if the goal posts constantly changed. Fact is Jimmy Carr did nothing wrong or illegal and before messers Cameron and Osbourne start shouting and passing comment on the moral rights of his action they should remember that members of the Cabinet and their families have quite legally been using Tax Avoidence schemes for decades to escape IHT and Personal Tax. Instead of the revenue highlighting certain high profile left wing individuals and other low lying fruit, perhaps they should look at the major companies who avoid Billions of pounds in tax which the revenue and the government seemingly happy to turn a blind eye. Tax avoidence has been around for centuries and is I think impossible to stop if the tax system was simpler and fairer then perhaps people wouldnt feel that they have to look at ways around it.

Reply
Mr. David Jackson Jul 16th, 2012 at 10:29 AM

I have payed for financial advice and, perhaps naively assume that the 'experts' have an understanding of what is going on in finance and can do a much better job than I could in avoiding the worst losses. However, this has not proved to be the case and the huge instabilities and swings have often caught the markets unawares. This suggests to me that advisers don't understand which I consider morally wrong and incompetent. If you could rely on advisers people beyond a certain worth would not have to worry about trying to find ways of avoiding tax!

Reply
Comparingmeerkats Jul 16th, 2012 at 10:16 AM

To be frank, this comes down to risk again. Legislative risk is a very big risk indeed as if the tax laws change and are applied retrospectively then the client could suffer large losses.

This is why the regulators focus on issues such as volatility being the main indicator of risk is, in my view, not very helpful.

You've got to do things that are morally correct. In that way you protect yourself against legislative risk and again playing the part of that Frank fellow; there are plenty of ways to avoid tax legally and ethically. You may pay a little more tax than the guy down the road with the dodgy offshore trust, but there is less risk as concerns being asked to pay back all the tax you've dodged!

Reply
IFA Jul 16th, 2012 at 09:21 AM

Everyone uses tax avoidance schemes, I get all my clients to do an ISA and on some occasions get them to place investments in the spouses name as she is a non tax payer rather than joint names. What is OK and whats not!!? If its legal then its OK, or if you are a millionaire you are not allowed to plan you have to have all of your money in taxed investments!

Reply
RobSimpson_IFA Jul 16th, 2012 at 08:35 AM

How can a government which earns tax from deadly drugs (fags and booze) claim the moral high ground?

According to the PM it appears that legaility of the issue is no longer relevant!

Reply
Baz Jul 16th, 2012 at 12:34 AM

Mr Prime Minister wants to look closer to home for the "expenses Scandal within his own government before calling the kettle sooty arse"

Reply
AJP Jul 15th, 2012 at 10:34 PM

This reminds me of two old proverbs;

People in glass houses shouldn't throw stones.

Moderation in everything, including moderation.

Reply
 

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