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I must admit to being a trifle astonished at last week's events, for various reasons.

Astonishing #1

It seems, for instance, that some people - people who should know better - know no shame. See, for instance, Hypocrisy Abounds: Chancellor Accuses Labour of Double Standards. Mr. Osborne has helped further muddy the waters of public debate by demanding that the Labour party pay the notional personal tax liability of one of its key donors, merely on the basis that the donor could have paid more tax if he'd wanted to, by structuring his donation differently.

Let's recap on an old (and treasured) case: Ayrshire Pullman v CIR (1929) 14 TC 754:

"No man in this country is under the smallest obligation, moral or other, so to arrange his legal relations to his business or to his property as to enable the Inland Revenue to put the largest possible shovel into his stores."

There is more to the judgment than just this one sentence but it has come to mind because it effectively says that a taxpayer does not have to choose the most tax-expensive route, contrary to what Mr. Osborne is saying.  HMRC's Guidance for the new General Anti-Abuse Rule (GAAR) says:

"... the judgment of Lord Clyde in the Ayrshire Pullman case epitomises the approach which Parliament has rejected in enacting the GAAR legislation. Taxation is not to be treated as a game where taxpayers can indulge in any ingenious scheme in order to eliminate or reduce their tax liability."

So it is, by implication, acceptable for HMRC to take advantage of any means available in law to "deplete the taxpayer's pocket" - just not for the taxpayer to take similar steps to resist the attempt? I am not sure that the GAAR goes so far - although that does not necessarily stop HMRC from saying that it does.

Astonishing #2

The vast majority of tax advisers whom I know do not recommend the use of contrived or artificial schemes to cut tax bills. But they will happily help a taxpayer to structure commercial transactions in a tax-efficient manner. The GAAR should not change this but another important judgment - this one a little more recent - threatens to turn this approach on its head. H Mehjoo v Harben Barker [2013] EWHC 1500 (QB) found that a firm of accountants should have advised their client of a tax strategy and were liable for having failed to do so.

At first blush, this might seem an impossible scenario: incur the wrath of HMRC for advising on "avoidance" strategies, or pay up to the client for steering clear. (Although it may be that the accountants might have been able to discharge their perceived duty by merely telling the client that such a scheme existed, rather than actually implementing it).

All in all, who'd want to be a tax adviser? 

Regards all,

TW Ed