Alongside the Spring Budget, the UK government has launched a further consultation on raising standards in the tax advice market. This follows previous consultations (March 2020 and March 2021) where the government considered various options, including mandatory professional indemnity insurance (which was ruled out), leading to the conclusion that some sort of intervention in the tax advice market was necessary to address ‘a minority of incompetent, unprofessional and malicious advisers whose activities harm their clients, reduce public revenue, and undermine the functioning of the tax advice market’.
The government has brought this latter point into sharper focus and now seeks views on proposals which it says would ‘raise standards in the tax advice market through a strengthened regulatory framework’. The first step is to ‘mandate registration for all tax practitioners who wish to interact with HMRC’ although, as HMRC point out, registration alone will do little to drive up standards and could in itself give ‘false comfort’ that an agent is regulated.
At the centre of this latest consultation are three alternative options for the regulation of tax practitioners:
Mandatory professional body membership: this would require advisers to hold membership of a recognised professional body.
A hybrid, joint HMRC-industry enforcement model: members of the professional bodies would continue to be supervised by those organisations, while unaffiliated practitioners would be under HMRC supervision.
Regulation of the industry by a government body: this would in effect be independent regulation of the tax advice market.
HMRC already recognise that option one would present practical difficulties for currently unaffiliated practitioners and could even risk new professional bodies emerging which do not insist on entry requirements or particular standards, thus undermining the purpose of the whole approach.
Commenting on the proposal for regulation, Andrew Hubbard, Editor in Chief at Tolley, said: ‘Regulation of the tax profession has been discussed for as least as long as I have been involved in tax. Those discussions never got anywhere because there was no consensus within the profession that something needed to be done, let alone what form regulation should take. But times have changed and I don’t hear many voices objecting to regulation as a matter of principle. Of course there is a very long way to go before any of this becomes a reality, but I welcome the breadth of the proposals in the discussion document and the acceptance that this is a long-term project. Let’s hope that there is a continuing dialogue – it is in the interest of taxpayers, the profession and HMRC alike that we get this right.’
However, tax consultant and former CIOT President Ray McCann questioned whether the government was taking the correct approach. ‘The announcement of a further consultation on possible regulation is welcome; however, I fear it risks repeating the errors of the past,’ he said. ‘Instead of looking to regulate the whole of the tax advice market, the starting point should be behaviours, with those who mainly promote tax schemes being required to register with HMRC. This would involve appropriate sanctions, that could include being prohibited from advising clients, where they fail to register or fail to provide timely details to HMRC of what they are marketing.
‘Approached in that way would reduce the difficulty of introducing wide ranging regulatory arrangements impacting the generality of advisers who pose no risk to the tax system,’ McCann said. ‘It would also allow the much quicker implementation of regulation in high risk areas.’
Alongside the Spring Budget, the UK government has launched a further consultation on raising standards in the tax advice market. This follows previous consultations (March 2020 and March 2021) where the government considered various options, including mandatory professional indemnity insurance (which was ruled out), leading to the conclusion that some sort of intervention in the tax advice market was necessary to address ‘a minority of incompetent, unprofessional and malicious advisers whose activities harm their clients, reduce public revenue, and undermine the functioning of the tax advice market’.
The government has brought this latter point into sharper focus and now seeks views on proposals which it says would ‘raise standards in the tax advice market through a strengthened regulatory framework’. The first step is to ‘mandate registration for all tax practitioners who wish to interact with HMRC’ although, as HMRC point out, registration alone will do little to drive up standards and could in itself give ‘false comfort’ that an agent is regulated.
At the centre of this latest consultation are three alternative options for the regulation of tax practitioners:
Mandatory professional body membership: this would require advisers to hold membership of a recognised professional body.
A hybrid, joint HMRC-industry enforcement model: members of the professional bodies would continue to be supervised by those organisations, while unaffiliated practitioners would be under HMRC supervision.
Regulation of the industry by a government body: this would in effect be independent regulation of the tax advice market.
HMRC already recognise that option one would present practical difficulties for currently unaffiliated practitioners and could even risk new professional bodies emerging which do not insist on entry requirements or particular standards, thus undermining the purpose of the whole approach.
Commenting on the proposal for regulation, Andrew Hubbard, Editor in Chief at Tolley, said: ‘Regulation of the tax profession has been discussed for as least as long as I have been involved in tax. Those discussions never got anywhere because there was no consensus within the profession that something needed to be done, let alone what form regulation should take. But times have changed and I don’t hear many voices objecting to regulation as a matter of principle. Of course there is a very long way to go before any of this becomes a reality, but I welcome the breadth of the proposals in the discussion document and the acceptance that this is a long-term project. Let’s hope that there is a continuing dialogue – it is in the interest of taxpayers, the profession and HMRC alike that we get this right.’
However, tax consultant and former CIOT President Ray McCann questioned whether the government was taking the correct approach. ‘The announcement of a further consultation on possible regulation is welcome; however, I fear it risks repeating the errors of the past,’ he said. ‘Instead of looking to regulate the whole of the tax advice market, the starting point should be behaviours, with those who mainly promote tax schemes being required to register with HMRC. This would involve appropriate sanctions, that could include being prohibited from advising clients, where they fail to register or fail to provide timely details to HMRC of what they are marketing.
‘Approached in that way would reduce the difficulty of introducing wide ranging regulatory arrangements impacting the generality of advisers who pose no risk to the tax system,’ McCann said. ‘It would also allow the much quicker implementation of regulation in high risk areas.’
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