Because legitimate, responsible tax advice – the kind HMRC have no problem with – could potentially be deemed to have elements of artificiality to it.
This reflects the fact that tax law often embodies a formulaic rather than a substantive test – that is it sets down criteria by which, e.g., a company will be deemed to be trading as opposed to non-trading, or a taxpayer’s place of residence will be determined. The tax system draws lines and responsible taxpayers understandably want to know where those lines are, and how to ensure they stay the right side of them. Providing this advice could be deemed to be encouraging artificiality, even though this is clearly responsible and necessary tax advice.
We and HMRC believe the wording in PCRT strikes an appropriate balance. The professional bodies have tested, with HMRC, how the new principles would apply to various real and illustrative situations. This revealed that members abusing their position as adviser on a range of different schemes could be subject to disciplinary action, as well as particular behaviours such as not taking a reasonable and realistic view of the facts.