The ICAEW Stance on Tax Avoidance

Currently, according to the poll hosted by Accountancy Age that asks "Do you agree with the ICAEW's disciplinary stance on tax avoidance?", 84% of respondents say "No, leave it to the tribunals and legislators".

In Which The ICAEW Spouts Utter Nonsense

The ICAEW has fallen for HMRC's PR announcement about new "investment" in its appalling call centre service hook line and sinker.

The idea that the £34M (if that is what will really be spent) is new "investment" is utter nonsense. The money, as I have clearly explained on my HMRC site (and as indeed Lin Homer says), is merely a budget reallocation from other parts of the overall HMRC budget.

This is nothing more than window dressing!

As one commentator wrote on my HMRC site:

"Don't be fooled by the retoric, there's no new money, they are only robbing Peter to pay Paul, there will be some new jobs but the vast majority will be back room staff taken off working on post to answer phones.

They have spent God knows how much revamping the telephones so we're now connected to the CC system.

So telecalls will be answered more quickly but as we all know not everything can be done over the phone and written confirmation or paperwork is required. so the post receipts will go sky high, then the calls will triple cos everyone will want to progress chase and it's back to Square One, thank God I retire shortly."

How gullible can the ICAEW be?

ICAEW's Helpsheet On Aggressive Tax Avoidance

The ICAEW has issued a Helpsheet to remind its members of the terms of its own Code of Ethics and its guidance on professional conduct in relation to taxation. The Helpsheet focuses on the "aggressive end" of the tax planning spectrum and provides practical guidance.

It is sad to see that the ICAEW appears to be running scared wrt the tax avoidance witch-hunt orchestrated by dog whistle politicians and the media.

The helpsheet quite correctly states:

"Tax is a question of law and it’s the Government’s job to decide what legal tax planning arrangements it wishes to prevent."

However, it then goes on to imply that members should take a "moral" decision on behalf of third parties (ie clients)  wrt the "morality" or otherwise of legal (subject to a challenge in the courts) arrangements that may or may not reduce their business expenditure (ie taxes).

It would be far more constructive, and beneficial to the nation's finances, if the ICAEW were to set the agenda and push for a simpler tax system which would in effect make these schemes obsolete.

ICAP Fiasco Rumbles On

It seems that ICAP's decision to ban foreign accountancy students has stirred things up in the UK.

Yesterday I asked:

"Does this ruling apply to ICAEW students?"

By all accounts the ICAEW is also wondering this.

PQ Magazine reports that three UK-based accountancy bodies are seeking clarification from ICAP as to exactly what is going on.

The ACCA is looking for a formal meeting the ICAEW "is seeking clarification from ICAP as to what the implications are for ICAEW students", whilst CIMA said "we are fully aware of the situation and remain in regular discussions with ICAP."

It is unclear what ICAP's response, if any, has been.

It is possible that ICAP have realised that their decision may have been taken in haste, and that they now don't know how to respond.

ICAP Ban Foreign Accountancy Students

In July 2009 I wrote the following:

"A fellow member of the institute wrote to me today, voicing his fears over the dilution of the ICAEW brand wrt less demanding entry requirements for members of the profession who qualified in India and Pakistan.

"I recently discovered that ICAP(Pakistan) members just need to pass ICAEW 4 papers to become ICAEW members. Moreover ICAP members do not need to undergo any training with ICAEW ATO.

In past (until last wk) ICAP members needed to pass ICAEW 4 papers plus undergo 2 yrs training with ICAEW ATO to become ICAEW member, but now ICAP members do not need to undergo any training.

I do not know why ICAEW is giving its membership of other institutes members in this way. If ICAEW does not want other institute's members to undergo any training in ICAEW ATO (which is main strength of ICAEW), then I have to say merger with ACCA is a better option....

ICAEW has given more relaxation to ICAI(India) members."

Whilst the ICAEW may be relatively relaxed about brand dilution, it appears that ICAP are not.

PQ Magazine reports the following:

"Thousands of ACCA students are planning a protest march on the headquarters of the Institute of Chartered Accountants of Pakistan (ICAP), in Islamabad, tomorrow.

The march is in direct response to a letter sent by the ICAP to audit firms allegedly reminding them that hiring students with ‘foreign’ accountancy qualifications breaks Section 22 of the Chartered Accountants ordinance 1961.

PQ magazine has seen the letter behind the storm of protest - ‘Engaging a person as trainee of other bodies’. It specifically says: “refrain from engaging trainees of other accounting bodies, particularly trainees of foreign institutes of Chartered Accountants, or any other accounting body of similar nature.”

Social media sites erupted over the weekend with some students suggesting the letter must be a ‘fake’. Others wondered if ACCA, ICAEW and CIMA students would be deemed as ‘working illegally’ in Pakistan. "

Does this ruling apply to ICAEW students?

Here is a link to the ICAEW's page about ACA training in Pakistan.

You will need to meet one of the criteria to be able to study for the ACA from ICAEW.

• Members of the Institute of Chartered Accountants of Pakistan (ICAP) living in Pakistan who have obtained ICAP membership by complying with its training and examinations requirements can study for the ACA and apply to join ICAEW.
• Members of the Institute of Chartered Accountants of Pakistan (ICAP) living in other countries who have obtained ICAP membership by complying with its training and examinations requirements can study for the ACA and apply to join ICAEW.
• Students, affiliates or members of another internationally recognised professional accountancy body (such as ACCA) living in Pakistan may be able to study for the ACA in Pakistan. 

Saj Ahmed states on LinkedIn:

"I believe that the core issue is that the ICAP is losing ground to the ICAEW in Pakistan. New student members joining the audit firms wish to opt for ICAEW qualification as oppose to ICAP. 

This is because they know that they can do better with the ICAEW than the ICAP overseas. 

 ICAP's student numbers are down and hence such an action has been taken in order to protect their interest."

This appears to have stirred up a hornet's nest.

Izza Changes His Mind

On 29 June I wrote:

"Michael Izza (CEO of the ICAEW) has published a blog post today entitled "Chartered accountants and tax evasion". Oddly though his first sentence deals with tax avoidance, not evasion, specifically the Times campaign against tax avoidance."

It seems that the ICAEW has taken on board what I wrote, because the title of Michael's article has now changed to "Aggressive tax avoidance - my view".

Thanks to Tax Journal for pointing that change out.

Kicking Off On Michael Izza's Blog

I see that it is rather kicking off on Michael Izza's blog about tax avoidance.

Good to see that fellow members are not docile/passive about this issue!

My views on the subject are here: An Opportunity Lost - Michael Izza Gets Stuck On K2

An Opportunity Lost - Michael Izza Gets Stuck On K2

Michael Izza (CEO of the ICAEW) has published a blog post today entitled "Chartered accountants and tax evasion". Oddly though his first sentence deals with tax avoidance, not evasion, specifically the Times campaign against tax avoidance.

He goes on to say:

"I believe that there is no place for our profession in the creation or maintenance of these sorts of tax schemes...

In these difficult times, any ICAEW Chartered Accountants who are engaged in the kinds of schemes highlighted in The Times need to look at themselves in the mirror and ask – am I upholding the honour and reputation of ICAEW Chartered Accountants and am I seen to be doing that? If the answer is no then they need to ask themselves whether they want to belong to our profession or not? "

Sadly Michael has missed an opportunity to stand up against the media and political witch hunt that is threatening both legitimate tax avoidance and the profession itself.

Instead of calling for the simplification of the tax system, which would kill many complex tax avoidance schemes stone dead, he kowtows to the pressure of the media and political witch hunt and implies that the ICAEW wants members who offer legal tax schemes which the ICAEW does not approve of to leave the ICAEW.

As Jason Selig commented the other day on the ICAEW Group discussion about tax avoidance on LinkedIn:

"How is this a moral question?- there is no "right" or "wrong" about paying tax. 

Is it moral to save for a pension or open an ISA or invest in an EIS scheme? 

All of them save tax and if it wasn't for the tax break you wouldn't do them. A tax adviser is under a "moral" obligation to offer these kind of schemes to clients and warn about the ramifications, tax investigation, exposure in the media of actually doing them. 

To fail to offer the schemes where relevant would be potentially negligent. 

You may find them repugnant - as do I in some of the more aggressive schemes such as K2, and my advice to clients is not to enter into them - but that's not my call it's the client's - the fact is it's legal and fully disclosed on the tax returns - if HMRC want to challenge there is a legal process that allows them to do so. "

As I noted the other day on my HMRC site:

"Avoidance is a perfectly normal human thing to try to do, the politicians are not in a position to lecture the rest of us on 'morality'." 

The media and politicians lecturing us on morality is as natural as a cat walking on its hind legs.

ICAEW Members Disconnected From ICAEW

Unsurprisingly of those members of the ICAEW that could be bothered to vote, a significant percentage (almost 20%) voted against an increase in the annual subscriptions.

Accountancy Age reports that of the nearly 8,000 members that voted, 19.8% voted against an increase.

The ICAEW has over 138,000 members worldwide, the turnout of less than 6% is a disgrace and shows an alarming disconnect between the bunker in Moorgate and the membership who live and work in the real world.

Based on the low turnout and (relatively) high vote against an increase in subscriptions, the ICAEW will have its work cut out for it if it is forced to fill the £40M black hole in the pension scheme by increasing subscriptions again!

ICAEW Technical Advisory Twitter Account

The ICAEW have set up a special twitter account that gives access to a specialist advisory team to support ICAEW members, by providing free confidential advice on and help with any technical or ethical problems, issues or questions.

The account is at this address @ICAEW_TAS