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Engaging with tax agents: recommendations

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HMRC should improve tax agents’ compliance by providing more support to those experiencing difficulties and applying sanctions where performance is poor, the National Audit Office report concluded.

In ‘HM Revenue & Customs: Engaging with Tax Agents’ the spending watchdog observed that the department does not currently analyse data on the compliance track record of individual agents, nor does it tailor its approach to agents according to their performance.

Noting that HMRC does not set conditions on people wishing to act as tax agents, but is considering introducing registration of agents, the NAO said the minimum requirements for registration should be ‘relevant and measurable’.

HMRC should consider further ways of making agent authorisation ‘simpler and quicker’, the NAO said.

It should take steps to encourage greater use of electronic services, and enhance those services further to allow additional transactions online such as tax code amendments, communication by email, tools to support improved compliance, and self-serve agent authorisation.

The NAO added: ‘The department should examine the possibility of building on its relationship with the tax agent community to work together to design new systems and services that would lead to efficiencies for both parties. There may be opportunities for sharing resources and expertise, or even investment costs, perhaps starting with the design of more specialist software.’

Amyas Morse, head of the NAO, said: ‘HMRC could achieve better value for money by increasing the level of tax compliance of taxpayers who are represented by tax agents, while doing more to minimize the costs of its engagement with such agents.

'The Department has a strategy for working more closely with tax agents but implementation will require a plan detailing how the expected benefits will be achieved. To the extent that there are opportunities to increase tax revenues significantly, it may make sense to incur some short term set-up costs.’

The market for preparing tax returns in the UK is worth £2.5 billion, the NAO reported. ‘Eight million taxpayers receive help from third parties in completing and filing income tax and corporation tax returns each year. Around 43,000 professional tax agent firms, ranging from international corporations to sole traders, assist taxpayers with their tax affairs.’