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Professor Richard Murphy discusses plans for tax avoidance fines on Radio 4

Tax expert believes the proposals will be welcomed by accountants

by Ed Grover

Professor Richard MurphyProfessor Richard Murphy has appeared on BBC Radio 4 to discuss new proposals for imposing tougher penalties on accountants who provide advice on how to avoid tax.

The political economist, who is in the Department of International Politics at City, told the Today programme (16:00) that the new sanctions would act as a deterrent and help address the UK’s tax avoidance problem.

Under the proposals from the UK Treasury, accountants and advisors face fines worth up to 100 per cent of the tax that their clients avoided.

Professor Murphy said that those providing advice and selling schemes that lower clients’ tax bills do not currently face much risk of financial penalty.

“It’s going to be an amazing deterrent,” he said. “But don’t expect to see it in court. It’s like a nudge effect in behavioural economics.

“It’s just going to force the accountants and lawyers out of the market and I think every honest accountant and lawyer in the country will be jumping for joy this morning that those who have been selling these schemes will be put out of practice.”

Asked how widespread tax avoidance was in the UK, Professor Murphy said HM Revenue and Customs estimated the amount at around £3 billion, but he said his own estimate was nearer £10 billion.

He explained that accountants and lawyers must have professional indemnity insurance before they can provide services to a client, but the scale of the proposed fines would mean insurance companies could refuse to cover those who may breach the rules.

“This rule is odd – I don’t expect it to ever be used,” he said. “The impact is not going to be for the fact that the rule is there, in the sense that it will be imposed, but because accountants and lawyers will no longer be able to take the risk of selling these schemes.”

Professor Murphy recently wrote an article for the Guardian about how some wealthy individuals have avoided paying inheritance tax in the UK.

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