Of course, the same applies to HMRC when it is challenging a client’s tax affairs. Strict time limits apply and these can range from four years to six, 12 or 20 years depending on the nature of the taxpayer’s behaviour or the behaviour of anyone acting on their behalf, which could include an independent financial adviser.
3. Relying on out-of-date advice or not following the original advice
It is surprising how many people seek expert advice, but then do not follow it. This is true in the tax world as well as for financial advisers.
Often when a plan of action is created to achieve a client’s aims, there are conditions that must be met within tax legislation and specific records that must be kept.
For example, the statutory residence test has several sub-tests that must be met for an individual to retain their UK resident or non-UK resident status, and all of the conditions must be carefully followed.
Taxpayers also get into difficulties when they have relied on out-of-date advice long after the relevant legislation has changed.
With a new Finance Act and new tax laws every year, relying on advice given many years ago — or even to somebody else in slightly different circumstances — is not a good idea.
Worse still, where subsequent tax errors then lead to penalties, relying on out-of-date advice will be regarded by HMRC and the courts as “careless”, meaning that penalties will start from a minimum of 30 per cent of the tax due.
4. Not seeking specialist advice on specialist tax issues
Using a medical analogy, you would not ask your local GP to carry out complex knee surgery.
Likewise, if tax advice on stamp duty land tax or the annual tax on enveloped dwellings is needed then this is probably a specialist area, and a general accountant may not know the answer.
Similarly, specialist tax advice may be necessary for serious issues, large transactions, or important decisions such as retirement, selling property or selling a business. It is crucial to get the appropriate expertise to make sure the tax advice is correct.
Accountants and tax advisers are required to adhere to their institutes’ joint Professional Conduct in Relation to Taxation, which specifically requires that “a member must not undertake professional work which they are not competent to perform unless they obtain appropriate assistance from a suitably qualified specialist”.
5. Not appreciating complexity in offshore dealings
HMRC’s data from 2019 suggested that one in 10 people in the UK have some assets or financial interest outside the UK.
The taxation of anything offshore generally requires some specialist input, whether it is the interpretation of a double taxation agreement, claiming foreign tax credits, or simply understanding how a foreign investment policy fits into the UK tax rules, because it is rarely straightforward.
