Consultation on Regulating UK Tax Advisers by HMRC

HMRC wants to remove unqualified tax advisers from the market to raise standards for landlords, businesses, and taxpayers.

The taxman has launched a hard-hitting consultation brief that takes no prisoners about the quality of advice offered by some dodgy practitioners and gives the industry a choice to improve standards or impose a compliance regime.

“Although levels of non-compliance are generally higher among taxpayers represented by an unaffiliated tax practitioner than those represented by a professional body member, there are still unacceptable levels of non-compliance among taxpayers using agents who are members of professional bodies,” the Treasury said.

“The government concludes that professional body membership improves compliance, but on its own is probably insufficient.”

Tax advice choices

The consultation gives tax advisers three choices to strengthen the industry's regulatory framework:

• Join a recognised regulatory body for supervision
• Enforcement by a joint HMRC and industry body
• Regulation by a government body

HMRC wants a more professional tax advice market by regulating unqualified consultants who must work to professional standards.

The UK has around 85,000 individuals offering tax services. Thousands of tax agents need formal qualifications, and the government is concerned that they may give incorrect advice that financially harms taxpayers.

Unlike most other countries, tax advisers are not regulated in the UK. Anyone can offer tax advice and services without oversight if they do not belong to a professional body.

Weeding out the rogues

HMRC says the consultation aims to weed out these rogue advisers and to promote integrity in the tax advice system so taxpayers can rely on the information they are given.

Besides exploring how to regulate the marketplace, the consultation raises some other points, such as:

• Making tax advisers register with HMRC if they want to interact with HMRC on behalf of a client
• Taking out mandatory levels of professional indemnity insurance to financially protect clients from poor advice
• Defining tax advice to give clarity to who needs to sign up to the HMRC compliance regime
• Evolving an enforcement and sanctions process for supervising advisers who fail to comply with the new rules

The measures may involve advisers proving their competence by passing exams that allow them to offer different levels of advice.

Incompetent and unprofessional

Nigel Huddleston, financial secretary to the Treasury, said: “A minority of practitioners who are incompetent, unprofessional or unscrupulous who continue to operate, harming their clients and the public finances.

“The government has taken recent action to tackle the most egregious behaviour in the market, particularly from promoters of tax avoidance and repayment agents, and has shifted power away from repayment agents back towards the taxpayer. But more needs to be done.”

The consultation looks at 916 business taxpayers filing self-assessment returns. The analysis shows that unregulated tax agents handled 83 cases, of which 34 per cent were non-compliant and accounted for 57 per cent of the total tax liability.

HMRC argues that unregulated tax agents are responsible for more non-compliant cases and a larger slice of tax liabilities than regulated tax agent cases.

Source: HMRC

The consultation runs until May 29, 2024.

Read the full consultation document.