Tax professionals have reacted angrily to a National Audit Office report suggesting that tax returns prepared by agents are more likely to understate liabilities than returns filed by taxpayers who do not have an agent, that paying for professional help is ‘not without risk for a taxpayer’, and that tax agents may need more support.
The NAO ‘affirms’ that good tax agents help their clients get their tax right. But according to an analysis carried out by the NAO of a sample of tax returns, ‘self-assessed income tax returns filed by customers represented by agents are more likely to have under-declarations of tax (resulting from error, failure to take reasonable care or evasion) than returns filed by non-represented taxpayers,’ it said.
Small and medium-sized tax agents appeared to be associated with higher rates of under-declared liabilities than the largest 100 firms.
‘A key reason may be that the tax affairs agents deal with are more complex,' the NAO said. 'However, the analysis indicates that paying for professional help is not without risk for a taxpayer and that there might be an opportunity for HMRC to increase tax revenues by providing better support to tax agents and by better targeting of poorer ones.’
The analysis was based on 2004/05 returns. The Association of Taxation Technicians said it was concerned by the age of the data used and a ‘lack of in-depth analysis’. Comments made in the report could be misinterpreted without proper analysis, it warned, and the report took no account of over-declarations of tax ‘which can clearly be very significant’.
The Chartered Institute of Taxation said the report found that, despite their usually more complicated tax affairs, under-declarations for represented taxpayers ‘represent a much lower proportion of their total tax liability, compared to figures for unrepresented taxpayers’.
Anthony Thomas, the CIOT’s Deputy President, said: ‘We see this as a missed opportunity. It would have been really useful to have had proper analysis of who are making these errors and why. We have been working with HMRC for many years on these issues; it is unfortunate that the report does not reflect this. Nor does it look at HMRC’s own error rate.
‘We welcome the acknowledgement in the report that were it not for the work of good agents in ensuring clients get their tax right, the level of under-declarations could be significantly larger. Overall tax agents save the Government money both by helping their clients get their tax bills right and by taking on tasks that would otherwise fall to HMRC.’
In a note sent to members, the CIOT’s Chief Executive Peter Fanning said that while some of report’s recommendations are helpful, ‘the report as a whole is severely constrained by an inadequate evidence base’.
An HMRC spokesman told Tax Journal that the NAO was provided with the most up-to-date data available. ‘There will always be a time lag between taxpayer returns being filed and HMRC concluding its enquiries into these returns,’ he said.
‘We collect any under-declared tax and refund any overpayments. Although the enquiry programme does not currently record tax over-declarations, in response to a previous NAO recommendation, this information will now be reported in future.’
HMRC welcomed the NAO report and its recognition of the steps already taken by HMRC to improve its engagement with tax agents, he added. ‘HMRC has a collaborative relationship with the tax agents community and will work with them to reduce costs, increase compliance and improve customer satisfaction.’
'HM Revenue & Customs: Engaging with Tax Agents’ is available via www.lexisurl.com/K0uCO.
Tax professionals have reacted angrily to a National Audit Office report suggesting that tax returns prepared by agents are more likely to understate liabilities than returns filed by taxpayers who do not have an agent, that paying for professional help is ‘not without risk for a taxpayer’, and that tax agents may need more support.
The NAO ‘affirms’ that good tax agents help their clients get their tax right. But according to an analysis carried out by the NAO of a sample of tax returns, ‘self-assessed income tax returns filed by customers represented by agents are more likely to have under-declarations of tax (resulting from error, failure to take reasonable care or evasion) than returns filed by non-represented taxpayers,’ it said.
Small and medium-sized tax agents appeared to be associated with higher rates of under-declared liabilities than the largest 100 firms.
‘A key reason may be that the tax affairs agents deal with are more complex,' the NAO said. 'However, the analysis indicates that paying for professional help is not without risk for a taxpayer and that there might be an opportunity for HMRC to increase tax revenues by providing better support to tax agents and by better targeting of poorer ones.’
The analysis was based on 2004/05 returns. The Association of Taxation Technicians said it was concerned by the age of the data used and a ‘lack of in-depth analysis’. Comments made in the report could be misinterpreted without proper analysis, it warned, and the report took no account of over-declarations of tax ‘which can clearly be very significant’.
The Chartered Institute of Taxation said the report found that, despite their usually more complicated tax affairs, under-declarations for represented taxpayers ‘represent a much lower proportion of their total tax liability, compared to figures for unrepresented taxpayers’.
Anthony Thomas, the CIOT’s Deputy President, said: ‘We see this as a missed opportunity. It would have been really useful to have had proper analysis of who are making these errors and why. We have been working with HMRC for many years on these issues; it is unfortunate that the report does not reflect this. Nor does it look at HMRC’s own error rate.
‘We welcome the acknowledgement in the report that were it not for the work of good agents in ensuring clients get their tax right, the level of under-declarations could be significantly larger. Overall tax agents save the Government money both by helping their clients get their tax bills right and by taking on tasks that would otherwise fall to HMRC.’
In a note sent to members, the CIOT’s Chief Executive Peter Fanning said that while some of report’s recommendations are helpful, ‘the report as a whole is severely constrained by an inadequate evidence base’.
An HMRC spokesman told Tax Journal that the NAO was provided with the most up-to-date data available. ‘There will always be a time lag between taxpayer returns being filed and HMRC concluding its enquiries into these returns,’ he said.
‘We collect any under-declared tax and refund any overpayments. Although the enquiry programme does not currently record tax over-declarations, in response to a previous NAO recommendation, this information will now be reported in future.’
HMRC welcomed the NAO report and its recognition of the steps already taken by HMRC to improve its engagement with tax agents, he added. ‘HMRC has a collaborative relationship with the tax agents community and will work with them to reduce costs, increase compliance and improve customer satisfaction.’
'HM Revenue & Customs: Engaging with Tax Agents’ is available via www.lexisurl.com/K0uCO.
90a1d87b-c1b5-43c3-a720-cd324830adee.tmb-editorspic.jpg?sfvrsn=1b2d0a7e_1)
