Building professional connections

The complexity of the UK tax system means advisers from all disciplines need to work together to achieve the best outcomes for their clients, writes Dawsons Solicitors partner Robert Macro.

Labour’s time in government saw increasingly complex updating of tax rules in the UK and the introduction of several very complex rules surrounding anti-avoidance issues.

The “austerity” budget introduced by the new coalition Government will bring further changes, adding another burden to advisers to high net worth private clients. Indeed, it is likely that the way advisers (legal, financial, accountancy or otherwise) advise their clients will change as advisers of all disciplines will need to look to each other and work together to provide their clients with a robust holistic service if they are to act in their clients’ best interest.

In the ever-changing complex world of UK tax, finding the right answers for clients will now inevitably involve an approach by advisers of at least two or three disciplines to obtain the right plan for any client and the message must be “know your role”.

In an era of simple tax laws, it is possible that an adviser may have taken on all tasks for his client and been confident that he acted in the best interest of his client and his own business. However, in the current complex self-assessment model, failure to be up-to-date may lead to risk and in the worst cases liability for bad advice.

Let’s look at how the old model of working incurs the risk of getting it wrong and how a co-operative approach between advisers can assist in getting it right. Having recently been approached by a new client, a financial adviser was horrified to find a previous adviser had suggested tax planning by way of offshore companies, shares held by nominees and non- declaration of income in the UK for some 20 years. The client had become very nervous with the introduction of new tax information exchange agreements and was living in fear of discovery by HMRC.

However, the previous adviser, having set up the offshore structure with no thought to the myriad of anti-avoidance legislation in the UK, then convinced the client that he should invest all company funds in a product that lost 80% of its value in 12 months. The new adviser spotted the problem immediately and approached us for clarification of the issues arising. The client subsequently approached us within days and we helped by using the Liechtenstein disclosure facility to deal with the tax issues, minimise penalties, give the client peace of mind and allow the new financial adviser to get on with the job of recovering value for the client. The client relationship with the new financial adviser is now, as you would expect, firmly entrenched.

In truth a good adviser will recognise the pitfalls of any action and the requirements and aims of his client. However, any private client relationship is likely to lead to the question of investment and financial products (from the complex deferment of income products to perhaps a simple life assurance policy). The current market for financial services offers more and more products for a client’s interest and in financial planning. In order to access the market for financial products, a lawyer or accountant and his client will need to consult a financial adviser.

A financial adviser with his client will need to consider any planning in the light of the current UK tax law. If either advise and get it wrong, there is a risk of potential liability. The question must then be is it worth taking on such a risk? Risk means potential liability and any liability cannot be good for the client or the adviser.

The complexity of both the legal changes to the tax law in the UK and the increasing opportunities for financial products to meet those changes for clients suggest that professionals need to work together more than ever before, not just for their own interests but in the interests of their clients.