Many accountants will be relieved to hear of a recent Court of Appeal ruling that general accountants are under no obligation to advise clients to enter into aggressive tax avoidance schemes.
The Court of appeal overturned the previous ruling that “accountants had a positive duty” to offer “specialist tax planning”.
The case concerned was that of a Mr Mehjoo who was born in Iran and moved to the UK at the age of 12 as a refugee. After being granted asylum in 1982 he later became a professional squash player.
Later on in life he set up a highly successful fashion company. The sale of that business generated for him a £850,000 capital gains tax bill. So he sought advice from his accountants.
The accountancy firm provided information on various tax planning schemes. The sale of the company took place in April 2005, and Mehjoo realised a gain of £8.5 million.
Mehjoo and HB continued to pursue tax schemes to wipe out the CGT liability, but the question of Mehjoo’s potential non-UK domicile was not raised until a meeting with Barclays Wealth in June 2005.
A DOM 1 form was submitted for Mehjoo in March 2006 and HMRC confirmed he was non-UK domiciled in April 2006.
Mehjoo took up a tax scheme which cost £200,000 and was supposed to wipe out all the CGT due, but it was subsequently found not to work.
Mehjoo was advised that as a non-dom he should have used a different tax scheme known as the bearer warrant scheme (BWS), which may have eliminated all the gain before the sale by changing the shares into offshore assets.
Our view is this, when you give advice you should be qualified to do so either in terms of a tax qualification or in terms of experience. So it beggars belief that his residential status was not noted or taken into account, either by the accountants or the tax house concerned.
Ray Best can help you protect your financial future. To find out more, simply click here!