HMRC’s Director General for Business Tax, Jim Harra, talks about the department’s plans to incentivise agents to provide a service which benefits them, their clients and HMRC itself
Agents play a central role in the tax system. Our customers clearly value how agents can relieve them of the burden of managing their own tax compliance. And HMRC values the fact that agents know what they’re doing, which cuts down on the effort that we have to make in corrective work, compared to dealing with unrepresented taxpayers.
I think there’s more value to be had for the tax system from tax agents. For example, about 70% of small and mid-sized businesses currently use a tax agent. Small and mid-sized business non-compliance, however, represents an estimated 44% of the £34bn UK tax gap – the difference between the tax that is due, and the amount we actually receive. When an agent is managing the tax affairs of businesses, HMRC really shouldn’t have to intervene to resolve non-compliance that could have been identified and sorted out by their agent.
The key thing for me in the future is making sure we’ve got the maximum value we can from having an agent in the relationship between HMRC and the taxpayer.
You first have to envisage what the tax system is going to be like in the future. HMRC’s plan is to launch new personalised digital services for our customers, which means that it will be much easier and more intuitive for them to interact with the tax system. ‘Your tax account’, which already has over 2m users, is a step towards that. I don’t believe this means that taxpayers will suddenly decide they’re going to do everything for themselves and don’t need an agent any more. They will probably think: ‘It’s easier for me to do this now, but I have other things I want to do with my time, so I’ll still pay someone else to do it.’
But I think taxpayers will be looking to agents to either deliver them a lower-cost service or, more likely, a service which adds value to the one they get now. They won’t need to rely so much on agents just to manage the basic administration, but will instead look to agents to help them to deal with the more complex issues and actively help them to stay on the right side of compliance.
HMRC wants to provide a better opportunity for agents to manage upfront the compliance risks their clients might present, because this is better for the client, better for HMRC and better for the agent, which can market this service.
When an agent represents a taxpayer, we will want to know what services that agent is providing. This could be a perfectly professional basic service, or it could be one which offers lots of added value – in terms of identifying and managing compliance risks – so that an agent’s client presents to us as compliant or low risk. We’ll be giving agents recognition for the value-added work they’re doing, and we believe their clients will be willing to pay for this, because they will feel the benefit of a lighter touch from HMRC.
At the moment, it’s difficult for HMRC and taxpayers to differentiate between tax agents. When an agent offers a low cost, but low value-added service, it’s very hard for the taxpayer to evaluate whether using that service is in their best interest in the long run. And HMRC can’t see which agents are adding more value than others, which means we don’t differentiate between them and give credit to the agents that added the most value.
We want to be able to differentiate between the agents that do offer value-added services and those that don’t, and to incentivise all agents to provide these services – and adhere to high standards. Part of this incentive would be making sure that those agents that provide more get the credit for doing so – whether that involves being able to take on a wider range of functions for their clients via our online services, or by receiving fewer low value interventions from HMRC.
We know that tax agents operate in a commercial market. In order for them to be able to offer added-value services, we’ve got to help make it commercially viable for them. No doubt, there is still a future for the basic business model, which involves simply turning a set of information into a filing. But we want more customers to ask for more from their agents in the future, by looking for a filing that they can be sure that HMRC will be happy with – not just one that’s filed on time, with payments made on time, but one that’s accurate and complete. We won’t offer poor quality services to agents who don’t provide this value added approach for their clients – everyone will get a good standard of service.
Exactly how we work with agents will vary, though, according to their needs, their compliance history and the value they add to the administration of the tax system.
The future is clearly digital. We want to build in the role of the tax agent when rolling out new digital services, because they will be as central to the tax system of tomorrow as they are to the tax system today. ‘Agent online self-serve’ (AOSS) is a new online service aimed principally at professional tax agents, which will eventually replace the existing online service and act as the foundation stone for a range of expanded and improved services for agents in the future.
The first AOSS service will be tested in pilot form by a small number of agents this spring. Once they have checked their client list and confirmed it is correct, these volunteers will be able to access the same PAYE liability and payment information – the PAYE account – that their employer clients can see.
We will continue to develop and test the service throughout 2015, in response to feedback from the customers concerned. We’ve already moved from ideas on paper to action and we’re confident that agents will see the benefits of this new service quickly.
The vast majority of agents have perfectly acceptable standards, but our intention is to work with the industry to agree a set of professional standards and to differentiate agents’ access to services based on their adherence to them.
We will set the professional standards that we expect agents to meet to be able to transact with us. HMRC will use the data it holds – on how tax agents and their clients comply with tax obligations – to monitor the performance of paid agents. We will have the ability to restrict access to HMRC services – or to intervene with the agent – where minimum standards are not met. We are working with the representative bodies to agree these standards across the industry, for example by developing the Professional conduct in relation to taxation guidance.
No. HMRC has no intention of being the regulator for the tax agent industry. But we must intervene where we see standards that fall below an acceptable level, which may involve restricting access to some services where necessary. And we will act to protect taxpayers from scams; for example, the action we’ve taken against copycat and misleading websites. For the minority of agents with performance below an acceptable level, we have a gateway in the legislation which enables us to disclose information about them to their professional bodies. We’ve worked closely with those bodies on standards for professional conduct.
The big goal here is not simply about eradicating poor performance by the small minority. It’s about lifting the added value that the industry as a whole provides for its clients and that they are willing to pay for. We are talking about incentivising, so that agents with a business model selling value added services are able to sell those services to their clients, because that benefits us as well.
The tax system creates a market and a role for tax agents. We want them to perform their role in a way which helps the tax system to run as well as it can. But we’re certainly not in the position of just trying to transfer cost out of HMRC onto agents and their clients.
If anything, we’d like to reduce some of that cost. There are a lot of represented taxpayers receiving compliance interventions from HMRC. This is either because we’ve identified a risk that could have been managed, if they’d been getting the right service from their agents, or because we perceive there’s a risk that isn’t actually there, which makes our intervention unnecessary for both sides. The more we can get agents up that value chain, the more we can remove the need for those interventions; and the more agents can sit down with clients and deal with compliance risks themselves, by taking a broader view of what’s in the best interests of a client. It’s not about transferring costs. It’s about relieving the burden on taxpayers and incentivising agents to deliver the kind of service that clients will expect in the future.
No one should be penalised for an innocent error, whether they are an unrepresented taxpayer or an agent representing a taxpayer. Clearly, anybody can make a mistake and we should respond in a proportionate way. But if an agent keeps making the same kind of mistake, then it’s not an innocent error. It’s a lack of professional care and you’d expect us to intervene appropriately.
If an agent makes a technical error and we can intervene with the educational support we have available, such as webinars, we will do. But if we have evidence someone is deliberately doing something wrong to try to cheat the system, then we’ll take tough action.
What we don’t want to see is taxpayers – and their agents – being concerned that they’ll get a disproportionate response from HMRC if they make an innocent error after taking proper care. In the future, we’d like to see more emphasis on getting things right upfront, rather than allowing taxpayers to get things wrong and then penalising them. And we have recently published a discussion paper, seeking views on whether we could better differentiate in how we impose penalties between accidental error and deliberate or repeated lack of care.
Our aim is to provide this as part of AOSS, although this function will not initially be part of the service. Initially, we want to concentrate on providing the access to employer PAYE accounts and will then bring in a new digital authorisation and registration service and a personalised agents’ homepage. These services will be released in stages, once they have been fully tested and feedback from agents has been fed into the solution every step of the way.
The fact that we’re initially introducing AOSS to deal with PAYE is based on agents telling us that this area was a priority for them – further reflecting the long association we have with agents and their professional bodies, which means we understand what’s right for them, and right for us.
Views from tax professionals are invited. Please comment below or on the HMRC agents’ blog (see under the ‘Building the future for tax agents’ post).
HMRC’s Director General for Business Tax, Jim Harra, talks about the department’s plans to incentivise agents to provide a service which benefits them, their clients and HMRC itself
Agents play a central role in the tax system. Our customers clearly value how agents can relieve them of the burden of managing their own tax compliance. And HMRC values the fact that agents know what they’re doing, which cuts down on the effort that we have to make in corrective work, compared to dealing with unrepresented taxpayers.
I think there’s more value to be had for the tax system from tax agents. For example, about 70% of small and mid-sized businesses currently use a tax agent. Small and mid-sized business non-compliance, however, represents an estimated 44% of the £34bn UK tax gap – the difference between the tax that is due, and the amount we actually receive. When an agent is managing the tax affairs of businesses, HMRC really shouldn’t have to intervene to resolve non-compliance that could have been identified and sorted out by their agent.
The key thing for me in the future is making sure we’ve got the maximum value we can from having an agent in the relationship between HMRC and the taxpayer.
You first have to envisage what the tax system is going to be like in the future. HMRC’s plan is to launch new personalised digital services for our customers, which means that it will be much easier and more intuitive for them to interact with the tax system. ‘Your tax account’, which already has over 2m users, is a step towards that. I don’t believe this means that taxpayers will suddenly decide they’re going to do everything for themselves and don’t need an agent any more. They will probably think: ‘It’s easier for me to do this now, but I have other things I want to do with my time, so I’ll still pay someone else to do it.’
But I think taxpayers will be looking to agents to either deliver them a lower-cost service or, more likely, a service which adds value to the one they get now. They won’t need to rely so much on agents just to manage the basic administration, but will instead look to agents to help them to deal with the more complex issues and actively help them to stay on the right side of compliance.
HMRC wants to provide a better opportunity for agents to manage upfront the compliance risks their clients might present, because this is better for the client, better for HMRC and better for the agent, which can market this service.
When an agent represents a taxpayer, we will want to know what services that agent is providing. This could be a perfectly professional basic service, or it could be one which offers lots of added value – in terms of identifying and managing compliance risks – so that an agent’s client presents to us as compliant or low risk. We’ll be giving agents recognition for the value-added work they’re doing, and we believe their clients will be willing to pay for this, because they will feel the benefit of a lighter touch from HMRC.
At the moment, it’s difficult for HMRC and taxpayers to differentiate between tax agents. When an agent offers a low cost, but low value-added service, it’s very hard for the taxpayer to evaluate whether using that service is in their best interest in the long run. And HMRC can’t see which agents are adding more value than others, which means we don’t differentiate between them and give credit to the agents that added the most value.
We want to be able to differentiate between the agents that do offer value-added services and those that don’t, and to incentivise all agents to provide these services – and adhere to high standards. Part of this incentive would be making sure that those agents that provide more get the credit for doing so – whether that involves being able to take on a wider range of functions for their clients via our online services, or by receiving fewer low value interventions from HMRC.
We know that tax agents operate in a commercial market. In order for them to be able to offer added-value services, we’ve got to help make it commercially viable for them. No doubt, there is still a future for the basic business model, which involves simply turning a set of information into a filing. But we want more customers to ask for more from their agents in the future, by looking for a filing that they can be sure that HMRC will be happy with – not just one that’s filed on time, with payments made on time, but one that’s accurate and complete. We won’t offer poor quality services to agents who don’t provide this value added approach for their clients – everyone will get a good standard of service.
Exactly how we work with agents will vary, though, according to their needs, their compliance history and the value they add to the administration of the tax system.
The future is clearly digital. We want to build in the role of the tax agent when rolling out new digital services, because they will be as central to the tax system of tomorrow as they are to the tax system today. ‘Agent online self-serve’ (AOSS) is a new online service aimed principally at professional tax agents, which will eventually replace the existing online service and act as the foundation stone for a range of expanded and improved services for agents in the future.
The first AOSS service will be tested in pilot form by a small number of agents this spring. Once they have checked their client list and confirmed it is correct, these volunteers will be able to access the same PAYE liability and payment information – the PAYE account – that their employer clients can see.
We will continue to develop and test the service throughout 2015, in response to feedback from the customers concerned. We’ve already moved from ideas on paper to action and we’re confident that agents will see the benefits of this new service quickly.
The vast majority of agents have perfectly acceptable standards, but our intention is to work with the industry to agree a set of professional standards and to differentiate agents’ access to services based on their adherence to them.
We will set the professional standards that we expect agents to meet to be able to transact with us. HMRC will use the data it holds – on how tax agents and their clients comply with tax obligations – to monitor the performance of paid agents. We will have the ability to restrict access to HMRC services – or to intervene with the agent – where minimum standards are not met. We are working with the representative bodies to agree these standards across the industry, for example by developing the Professional conduct in relation to taxation guidance.
No. HMRC has no intention of being the regulator for the tax agent industry. But we must intervene where we see standards that fall below an acceptable level, which may involve restricting access to some services where necessary. And we will act to protect taxpayers from scams; for example, the action we’ve taken against copycat and misleading websites. For the minority of agents with performance below an acceptable level, we have a gateway in the legislation which enables us to disclose information about them to their professional bodies. We’ve worked closely with those bodies on standards for professional conduct.
The big goal here is not simply about eradicating poor performance by the small minority. It’s about lifting the added value that the industry as a whole provides for its clients and that they are willing to pay for. We are talking about incentivising, so that agents with a business model selling value added services are able to sell those services to their clients, because that benefits us as well.
The tax system creates a market and a role for tax agents. We want them to perform their role in a way which helps the tax system to run as well as it can. But we’re certainly not in the position of just trying to transfer cost out of HMRC onto agents and their clients.
If anything, we’d like to reduce some of that cost. There are a lot of represented taxpayers receiving compliance interventions from HMRC. This is either because we’ve identified a risk that could have been managed, if they’d been getting the right service from their agents, or because we perceive there’s a risk that isn’t actually there, which makes our intervention unnecessary for both sides. The more we can get agents up that value chain, the more we can remove the need for those interventions; and the more agents can sit down with clients and deal with compliance risks themselves, by taking a broader view of what’s in the best interests of a client. It’s not about transferring costs. It’s about relieving the burden on taxpayers and incentivising agents to deliver the kind of service that clients will expect in the future.
No one should be penalised for an innocent error, whether they are an unrepresented taxpayer or an agent representing a taxpayer. Clearly, anybody can make a mistake and we should respond in a proportionate way. But if an agent keeps making the same kind of mistake, then it’s not an innocent error. It’s a lack of professional care and you’d expect us to intervene appropriately.
If an agent makes a technical error and we can intervene with the educational support we have available, such as webinars, we will do. But if we have evidence someone is deliberately doing something wrong to try to cheat the system, then we’ll take tough action.
What we don’t want to see is taxpayers – and their agents – being concerned that they’ll get a disproportionate response from HMRC if they make an innocent error after taking proper care. In the future, we’d like to see more emphasis on getting things right upfront, rather than allowing taxpayers to get things wrong and then penalising them. And we have recently published a discussion paper, seeking views on whether we could better differentiate in how we impose penalties between accidental error and deliberate or repeated lack of care.
Our aim is to provide this as part of AOSS, although this function will not initially be part of the service. Initially, we want to concentrate on providing the access to employer PAYE accounts and will then bring in a new digital authorisation and registration service and a personalised agents’ homepage. These services will be released in stages, once they have been fully tested and feedback from agents has been fed into the solution every step of the way.
The fact that we’re initially introducing AOSS to deal with PAYE is based on agents telling us that this area was a priority for them – further reflecting the long association we have with agents and their professional bodies, which means we understand what’s right for them, and right for us.
Views from tax professionals are invited. Please comment below or on the HMRC agents’ blog (see under the ‘Building the future for tax agents’ post).
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