Media playback is unsupported on your device Media caption Margaret Hodge MP said there was evidence of accountancy firms devising new avoidance schemes

A report on tax avoidance by the Commons Public Accounts Committee has urged a ban on external accountants working inside government.

The recommendation aims to stop them telling clients about tax loopholes they find while working there.

The MPs said HM Revenue and Customs (HMRC) was in a "battle it cannot win" against the accountancy firms who have thousands of people giving advice.

HMRC said it was "aggressively fighting" tax avoidance and "winning".

In its latest report on tax avoidance, the committee turned its attention to accountancy firms after previously criticising multinational companies, including Starbucks, Amazon and Google, for the amount of corporation tax they paid.

The MPs said accountants were being seconded to work in the government to advise on changes to tax law but using the position to glean inside knowledge and tell businesses how to avoid tax. The MPs want the practice stopped.

'Conflict of interest'

They also called for a ban on firms being used by the public sector if they had been selling tax avoidance schemes.

Committee chairwoman Margaret Hodge said the practice represented a "ridiculous conflict of interest".

She said: "The large accountancy firms are in a powerful position in the tax world and have an unhealthily cosy relationship with government."

The large accountancy firms are in a powerful position in the tax world and have an unhealthily cosy relationship with government Margaret Hodge MP, Public Accounts Committee

The committee's report suggested that tax officials were outnumbered by well-resourced accountancy firms in key areas, such as businesses transferring their profits overseas in order to pay less tax.

It said the "big four" accountancy firms employed about 9,000 staff and earned £2bn a year from their tax work in the UK.

The report said: "We have seen what look like cases of poacher turned gamekeeper, turned poacher again, whereby individuals who advise government go back to their firms and advise their clients on how they can use those laws to reduce the amount of tax they pay.

"We are very concerned by the way that the four firms appear to use their insider knowledge of legislation to sell clients advice on how to use those rules to pay less tax."

The committee said HMRC was involved in a "never-ending game of cat and mouse" with the big accountancy firms over the issue, and added that UK tax law was "hopelessly complex and outdated".

Jim Harra, director-general of business tax at HMRC, told the BBC: "Clearly they [tax accountants seconded to the government] do go back out with some expertise and they do advise on how to use the legislation. We watch very carefully what advice accountants are giving to their clients.

Media playback is unsupported on your device Media caption Jim Harra, HMRC: Tax rules need to be reviewed and updated

"Provided that advice is how to use the legislation in accordance with the way Parliament intended it to be used, then we have no problems with that."

HMRC said that the government had announced last year it would invest a further £77m to expand the Revenue's anti-avoidance and evasion work.

An HMRC spokesman said: "The facts show that we are not only aggressively fighting battles against tax avoidance, but we are winning them.

"Since the end of 2012, we have won 11 tax tribunal cases against avoidance schemes, two of which were against large corporates.

"In the last three years alone, we have litigated more than 50 major avoidance cases, protecting billions of pounds of tax in the process."

'Strong professions vital'

Bill Dodwell, head of tax policy at Deloitte, said his firm was doing nothing wrong. He told the BBC: "We help companies pay the tax that is due."

The Institute of Chartered Accountants in England and Wales (ICAEW) said there was already international co-operation to tackle tax avoidance through the Organisation for Economic Co-operation and Development.

"The role of accountants is to help their clients pay the right amount of tax under the law," the ICAEW said.

"When it comes to strengthening tax systems, strong accountancy professions are just as vital as strong national rules and tax authorities. Accountants can help improve and strengthen tax rules."

Tax avoidance is the legal use of the tax framework to reduce the amount of tax payable whereas tax evasion is against the law.

Specialists in the field sometimes use the term "avoision" to refer to grey areas.

The BBC's File on 4 programme, Taxing Questions looked into this subject earlier in the year.