Tax avoiders to be deliberately bankrupted.....?..
Discussion
V8 Fettler said:
In other words, the basis of a contract. You've mentioned PI cover, which answers a point raised earlier and confirms that there is risk of cost consequences for a tax adviser who provides poor professional advice, this could include being sued. Why carry PI cover if there is no risk to indemnify against?
Is the PI cover a statutory requirement?
Just because advice later turns out to be wrong doesn't mean it's poor, or vice versa. If my currency adviser suggests I buy USD at today's rate of 1.27 and next week the rate has improved to 1.30 doesn't mean that the advice was poor, it could have fallen to 1.20 if subsequent events played out differently. They advise, I decide, and the risk is mine.Is the PI cover a statutory requirement?
V8 Fettler said:
In other words, the basis of a contract. You've mentioned PI cover, which answers a point raised earlier and confirms that there is risk of cost consequences for a tax adviser who provides poor professional advice, this could include being sued. Why carry PI cover if there is no risk to indemnify against?
Is the PI cover a statutory requirement?
They'll hold PI cover to help indemnify customers if they are definitively incorrect/make a mistake and should have known better. To use some banal examples, my accountant tells me what I need to pay and when. He works this out on the info I provide him and against the rules at the time.Is the PI cover a statutory requirement?
If he told me to pay on the wrong date, or worked out the tricky sums incorrectly so I paid too little/too much and I suffered a loss as a result, I'd tell him about it. If it was big enough I expect his PI would pay out (by "big enough" I mean him electing to use his PI rather than just pay me himself).
There are a number of rules that are very clear cut and ordinary. There are others that are grey (deliberately so by the government IMO - another story). On the grey stuff he tells me the risks but that the final choice is mine to make. No matter how buoyant or down in the mouth he sounds, it's a risk that I must make my own judgement on. If I make the wrong one, I would expect both him and his PI underwriter to tell me to get stuffed if I tried to claim. (I'd have words with him, get an explanation and potentially not use him again, but that would be the end of it).
As another example I carry PI myself. Increasingly clients insist on it (lazy HR and Legal departments - another another story), but IMO there is not a circumstance where it would ever be able to be claimed against it. I give my clients advice and guidance on matters where there is no right or wrong in the main. They must elect to act on it or otherwise. The final decision is theirs which is why it's incredibly unlikely my insurance would ever pay out.
V8 Fettler said:
Opinion or professional advice? There is a world of difference. As part of due diligence, the directors could take professional advice, EY are described as advisers for this particular scheme, I assume that they extracted a fee, therefore professional advisers.
The difference is down to the detail of the contract.If you ask me for a few ways of achieving something (doesn't really matter what) then I will ask you your parameters and give you some opinions along with the relevant pros and cons__ and charge you some money for it. It's up to you make a judgement based on that info. Now if I miss out a material risk then I think you are fair to expect some redress. If you go ahead with one of the options, __fully aware of the implications, and get pinged then the responsibility is entirely yours.
If you are paying me to achieve something that has to be watertight, unlikely to be overturned, clear liability/specifically insured etc, then of course I can help you but you will have to accept that that the potential upside will be less as there will be less risk involved.
Ultimately the customer decides the terms upon which they buy advice & there are plenty of places that will sell that advice in various forms. In a purely personal capacity, any way of stitching up EY gets my vote however in this case as long as they are operating within the law then that's fine. If you want to change this then you will have to change the law.
You have mentioned Big4 firms getting sued and it does happen. The main ones we hear about is failures of auditors to pick up misstatements. The responsibilities of an auditor is clearly defined and failure to discharge them properly has severe implications.
V8 Fettler said:
johnfm said:
Alpinestars said:
V8 Fettler said:
For financial services' contracts involving consumers where the contract is made in the UK under UK legislation then it has to be fair; enforcement described here: https://www.fca.org.uk/firms/unfair-contract-terms
It would be nonsensical if a weasel-worded contract had precedence over legislation.
They are not weasel-worded. I've never come across a contract by any accounting firm that has been overturned. Have you?It would be nonsensical if a weasel-worded contract had precedence over legislation.
Is the PI cover a statutory requirement?
You're now saying tax advisors do get sued - who said they didn't? it was the mechanism for the suing that you were challenging?
With more complex tax advice, there are no guarantees as to the efficacy of the planning. That's made clear in the engagement letter, which will refer to the work to be done. 99% of the time, they don't say and the tax outcome will be x. But, if an advisor guarantees the scheme will work, guess what? The client can sue under the engagement letter.
PI is there to protect clients in cases where, the tin is huge, and the work done was not what was written on the tin.
Now a question for you, you've had professional advice from accountant(s) lawyer(s), tax advisor(s) etc above, but you're still adamant you are right. What's your expertise which all of the former are missing?
The cost of PI insurance includes the cost to defend claims as well as pay them.
In the case of a tax advisor/accountant then only a seriously incompetent one would enter into such a scheme without a fully arse covering engagement letter about same scheme.
However on some schemes the revenue have taken the stance that the tax return was incorrectly completed rather than the scheme being wrong.
This opens up a different can of worms if the client has fully disclosed his position to the accountant.
In the case of a tax advisor/accountant then only a seriously incompetent one would enter into such a scheme without a fully arse covering engagement letter about same scheme.
However on some schemes the revenue have taken the stance that the tax return was incorrectly completed rather than the scheme being wrong.
This opens up a different can of worms if the client has fully disclosed his position to the accountant.
V8 Fettler said:
In other words, the basis of a contract. You've mentioned PI cover, which answers a point raised earlier and confirms that there is risk of cost consequences for a tax adviser who provides poor professional advice, this could include being sued. Why carry PI cover if there is no risk to indemnify against?
Is the PI cover a statutory requirement?
We carry PI cover for the same reason architects or engineers or accountants do. While professional services providers endeavour to provide services with good and reasonable care or with good industry practice (or whatever the threshold of the contract may be) there will be times when that service falls short and a client MAY have a cause of action. That's not to say that there is always a cause of action when advice doesn't prove to be correct. Is the PI cover a statutory requirement?
johnfm said:
We carry PI cover for the same reason architects or engineers or accountants do. While professional services providers endeavour to provide services with good and reasonable care or with good industry practice (or whatever the threshold of the contract may be) there will be times when that service falls short and a client MAY have a cause of action. That's not to say that there is always a cause of action when advice doesn't prove to be correct.
Architects, engineers and accountants typically work to the letter and spirit of the relevant regulations and legislation, if something goes wrong it's because there's been a major cock up. If tax advisors worked in the same way the advice would be pretty much get an ISA, top up your pension, and pay tax on the rest...Alpinestars said:
V8 Fettler said:
johnfm said:
Alpinestars said:
V8 Fettler said:
For financial services' contracts involving consumers where the contract is made in the UK under UK legislation then it has to be fair; enforcement described here: https://www.fca.org.uk/firms/unfair-contract-terms
It would be nonsensical if a weasel-worded contract had precedence over legislation.
They are not weasel-worded. I've never come across a contract by any accounting firm that has been overturned. Have you?It would be nonsensical if a weasel-worded contract had precedence over legislation.
Is the PI cover a statutory requirement?
You're now saying tax advisors do get sued - who said they didn't? it was the mechanism for the suing that you were challenging?
With more complex tax advice, there are no guarantees as to the efficacy of the planning. That's made clear in the engagement letter, which will refer to the work to be done. 99% of the time, they don't say and the tax outcome will be x. But, if an advisor guarantees the scheme will work, guess what? The client can sue under the engagement letter.
PI is there to protect clients in cases where, the tin is huge, and the work done was not what was written on the tin.
Now a question for you, you've had professional advice from accountant(s) lawyer(s), tax advisor(s) etc above, but you're still adamant you are right. What's your expertise which all of the former are missing?
Again, your view is that the engagement letter is the contract and cannot be amended, My view is that it's just another contract and can be amended by various means with or without the consent of the professional adviser e.g. by a regulatory body, adjudication or court action.
Where have I taken professional advice from other contributors to this thread? Other contributors have made observations, for which they've not extracted a fee as far as I am aware. Or do anonymous forum posts count as professional advice in your world?
bga said:
V8 Fettler said:
Opinion or professional advice? There is a world of difference. As part of due diligence, the directors could take professional advice, EY are described as advisers for this particular scheme, I assume that they extracted a fee, therefore professional advisers.
The difference is down to the detail of the contract.If you ask me for a few ways of achieving something (doesn't really matter what) then I will ask you your parameters and give you some opinions along with the relevant pros and cons__ and charge you some money for it. It's up to you make a judgement based on that info. Now if I miss out a material risk then I think you are fair to expect some redress. If you go ahead with one of the options, __fully aware of the implications, and get pinged then the responsibility is entirely yours.
If you are paying me to achieve something that has to be watertight, unlikely to be overturned, clear liability/specifically insured etc, then of course I can help you but you will have to accept that that the potential upside will be less as there will be less risk involved.
Ultimately the customer decides the terms upon which they buy advice & there are plenty of places that will sell that advice in various forms. In a purely personal capacity, any way of stitching up EY gets my vote however in this case as long as they are operating within the law then that's fine. If you want to change this then you will have to change the law.
You have mentioned Big4 firms getting sued and it does happen. The main ones we hear about is failures of auditors to pick up misstatements. The responsibilities of an auditor is clearly defined and failure to discharge them properly has severe implications.
fblm said:
V8 Fettler said:
Then why pay for professional advice? The concept of professional advice should be based on the transfer of risk in return for a fee, why else would you pay a professional adviser? If a salesman downplays a risk then that should not be at the customer's cost.
Given the previous mis-selling scandals, have not the days of caveat emptor for the professionally-advised purchase of financial products now gone?
I take it you have never bought a stock recommended by a professional? If you had do you think you have legal recourse against them if you lose money?Given the previous mis-selling scandals, have not the days of caveat emptor for the professionally-advised purchase of financial products now gone?
Murph7355 said:
V8 Fettler said:
Then why pay for professional advice? The concept of professional advice should be based on the transfer of risk in return for a fee, why else would you pay a professional adviser? If a salesman downplays a risk then that should not be at the customer's cost.
Given the previous mis-selling scandals, have not the days of caveat emptor for the professionally-advised purchase of financial products now gone?
As long as they're stating the risk then I don't see how it's not caveat emptor. And with investments such as this, I think it fair to expect the investor to have done a bit more homework. Otherwise it smacks of them going for something too good to be true.Given the previous mis-selling scandals, have not the days of caveat emptor for the professionally-advised purchase of financial products now gone?
You could argue they're not experts. But would you invest in something you didn't understand or couldn't be made to understand?
The mis-selling scandals are a scandal in their own right IMO. My instinct is that only a small proportion of these things were genuinely mis-sold. An awful lot were down to people not paying attention. You can't legislate against stupidity unfortunately. However the banks rolled. Easier to do that than go through the courts on every case IMO, hence the approach they took.
Where an investor employs a professional adviser to do the homework, should not the professional adviser take responsibility if that homework is subsequently marked as D minus ?
Murph7355 said:
V8 Fettler said:
In other words, the basis of a contract. You've mentioned PI cover, which answers a point raised earlier and confirms that there is risk of cost consequences for a tax adviser who provides poor professional advice, this could include being sued. Why carry PI cover if there is no risk to indemnify against?
Is the PI cover a statutory requirement?
They'll hold PI cover to help indemnify customers if they are definitively incorrect/make a mistake and should have known better. To use some banal examples, my accountant tells me what I need to pay and when. He works this out on the info I provide him and against the rules at the time.Is the PI cover a statutory requirement?
If he told me to pay on the wrong date, or worked out the tricky sums incorrectly so I paid too little/too much and I suffered a loss as a result, I'd tell him about it. If it was big enough I expect his PI would pay out (by "big enough" I mean him electing to use his PI rather than just pay me himself).
There are a number of rules that are very clear cut and ordinary. There are others that are grey (deliberately so by the government IMO - another story). On the grey stuff he tells me the risks but that the final choice is mine to make. No matter how buoyant or down in the mouth he sounds, it's a risk that I must make my own judgement on. If I make the wrong one, I would expect both him and his PI underwriter to tell me to get stuffed if I tried to claim. (I'd have words with him, get an explanation and potentially not use him again, but that would be the end of it).
As another example I carry PI myself. Increasingly clients insist on it (lazy HR and Legal departments - another another story), but IMO there is not a circumstance where it would ever be able to be claimed against it. I give my clients advice and guidance on matters where there is no right or wrong in the main. They must elect to act on it or otherwise. The final decision is theirs which is why it's incredibly unlikely my insurance would ever pay out.
One reason why your clients insist on PI cover is that it provides a path to recompense in the event of your bankruptcy.
RYH64E said:
johnfm said:
We carry PI cover for the same reason architects or engineers or accountants do. While professional services providers endeavour to provide services with good and reasonable care or with good industry practice (or whatever the threshold of the contract may be) there will be times when that service falls short and a client MAY have a cause of action. That's not to say that there is always a cause of action when advice doesn't prove to be correct.
Architects, engineers and accountants typically work to the letter and spirit of the relevant regulations and legislation, if something goes wrong it's because there's been a major cock up. If tax advisors worked in the same way the advice would be pretty much get an ISA, top up your pension, and pay tax on the rest...V8 Fettler said:
As previously, an unsophisticated consumer cannot sign away their rights to a fair contract, FSA: http://www.fsa.gov.uk/pubs/other/understood.pdf
Where an investor employs a professional adviser to do the homework, should not the professional adviser take responsibility if that homework is subsequently marked as D minus ?
Hasn't this already been addresssed?Where an investor employs a professional adviser to do the homework, should not the professional adviser take responsibility if that homework is subsequently marked as D minus ?
You're missing the difference between a sophisticated investor and an unsophisticated one!!
V8 Fettler said:
Within the context of this thread, you need to differentiate between an opinion and professional advice, also to recognise the difference between a sophisticated consumer who can make informed decisions without professional advice and an unsophisticated consumer (who should be able to rely upon professional advice as a basis to reach an informed decision).
Agree, very generally the consumer is considered unsophisticated but a corporate is always considered to be sophisticated/educated. 
Lets face it, most of the 'celebs' involved in such schemes are going to be unsophisticated investors.
However, they are probably putting their trust in investment professionals under their employment, either structured or casual, who advise them. However, that advice is likely to be highly weighted on whether that 'trusted' professional is making money from the scheme themselves. It isn't going to be true impartial advice, is it?
The celeb 'wants' to avoid tax.
the advisor 'wants' too help them avoid tax too, and make a commission or sale.
undoubtedly the advisor will mention in passing a risk, but will also in the same sentence probably downplay it, thus covering themselves....
However, they are probably putting their trust in investment professionals under their employment, either structured or casual, who advise them. However, that advice is likely to be highly weighted on whether that 'trusted' professional is making money from the scheme themselves. It isn't going to be true impartial advice, is it?
The celeb 'wants' to avoid tax.
the advisor 'wants' too help them avoid tax too, and make a commission or sale.
undoubtedly the advisor will mention in passing a risk, but will also in the same sentence probably downplay it, thus covering themselves....
V8 Fettler said:
My stance is that professional advisers who charge a fee for providing professional advice should take responsibility for that advice.
Again, your view is that the engagement letter is the contract and cannot be amended, My view is that it's just another contract and can be amended by various means with or without the consent of the professional adviser e.g. by a regulatory body, adjudication or court action.
Where have I taken professional advice from other contributors to this thread? Other contributors have made observations, for which they've not extracted a fee as far as I am aware. Or do anonymous forum posts count as professional advice in your world?
What happens if the advice is that there is a chance you will get a deduction for a cost if you do the following, but there is a risk that it will be successfully challenged by HMRC and potentially fail in Court? That's the broad tenor of advice when looking at schemes. No professional tax advisor worth his salt would guarantee a scheme to work where there is some risk - and if he does guarantee it, he'd be quite rightly sued. There is nearly always some risk when applying the tens of thousands of pages of tax law to a client's position.Again, your view is that the engagement letter is the contract and cannot be amended, My view is that it's just another contract and can be amended by various means with or without the consent of the professional adviser e.g. by a regulatory body, adjudication or court action.
Where have I taken professional advice from other contributors to this thread? Other contributors have made observations, for which they've not extracted a fee as far as I am aware. Or do anonymous forum posts count as professional advice in your world?
Very often with "schemes", advisors will take their own advice from a QC, and depending on what the QC says, they will apply it to clients. Those same QCs can end up in Court, defending the technicalities of the advice, and can fail to convince a Court. That's not bad tax advice, that's just the way tax law works, boundaries are pushed and retracted all the time, and new common law is established as a result. it's an art, not a science, which is the point you are wilfully missing.
The professional advice bit relates to people who know how it works, ie deal with the issue day to day, have told you how it works. You can take a horse to water etc etc.
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