Part One: Raising standards, the HMRC way
The Government is considering a significant step to raise standards in the tax advice market by mandating that all tax agents registered with HMRC must also be members of professional bodies. The 12-week consultation, which opened for responses in March, has sparked discussion and garnered support from various quarters, including the CPAA.
By requiring tax agents to be members of professional bodies, the Treasury is seeking to ensure that practitioners adhere to robust standards of competence, ethics, and professionalism. Any effort to raise standards in the tax advice market is, quite clearly, something the CPAA champions – but there are still questions to be answered on the proposals.
The consultation, titled ‘Raising Standards in the Tax Advice Market: Strengthening the Regulatory Framework and Improving Registration’, outlines three route to raising standards. These are: mandatory membership of a professional body, a hybrid model, and a new Government regulator.
Within the hybrid model, it is proposed that professional bodies would regulate their own communities to maintain standards, with HMRC focusing on looking after those in the tax advice market who don’t belong to a professional body, and the last option is a new tax advice market regulator.
In a meeting the CPAA recently attended with HMRC on the consultation, the idea of HMRC overseeing accountants raised some eyebrows amongst attendees. “Is HMRC really best placed to oversee accountants and do they have the expertise?” queried the CPAA’s Alison Hale.
“Tax advice is only one facet of what accountants do. Yes, it is clearly important, but our roles encompass so much more. Professional bodies understand this far better than HMRC is in a position to, which means they are much better placed to provide appropriate support and safeguard standards for the profession.”
Alison went on to say, “Adding another layer to what HMRC does, when it is already clearly overstretched, doesn’t seem sensible. They would most likely need to set up a new department for it and those costs would surely be passed on. I also wonder who will be advising HMRC along the way. If this involves the Big Four, then how can they ensure there is no conflict of interest?”
HMRC has specified that those who should be regulated would be “all tax practitioners, or only those that interact directly with HMRC” and the latter includes “any tax practitioners who use HMRC’s systems and services on behalf of paying clients and any interaction where the tax practitioner is acting on behalf of a client.” This ‘wider scope’, as HMRC terms it, is designed to catch incompetent, unprofessional or unscrupulous practitioners. Are they targeting the right audiences, though?
“I feel the scope of who is classed as ‘tax agents’ needs reviewing and revising”, says Alison. “HMRC said that anyone in payroll providing guidance on tax issues, for example pointing an employee to a P11D form, would be classed as a tax agent. Many people working in a payroll role within a business would not consider themselves tax advisors – they generally don’t deal in the broad and complex world of tax. I suspect they would be surprised and alarmed to fall into HMRC’s target group.
“So we have a situation where those who are not truly advising on tax fall within the scope of the proposed regulations, and we are likely to have groups that should be part of it that will be missed entirely. HMRC has stated that software providers will not fall under any new measures, despite tax advice being a core part of their offer. The classification of who does and does not fall into the term tax advisor needs attention and I hope this is highlighted during the consultation process.”
Check back later this month for a second part to this series, looking at the CPAA’s response to the HMRC consultation, how we are representing our members through this process, what we plan to change to ensure we are raising our own standards, and how you can get involved. The consultation is open until 29th May and you can read all about it here.
Part Two: Raising standards, the CPAA way
HMRC's ‘Raising Standards in the Tax Advice Market’ consultation is now in full flow. The aim is to enhance oversight and accountability within the tax advisory sector, and the Government is exploring different ways in which to do that.
As it stands, HMRC estimates 12 million taxpayers are being represented by some 85,000 tax advisors assisting 12 million taxpayers – and these advisors can do so without being regulated and without any oversight if they are not part of a professional body. When it comes to the importance of professional bodies, the CPAA couldn’t agree more with HMRC.
Member organisations and trade bodies play a crucial role in maintaining and elevating standards in the industry. What better way to safeguard the profession than through checks on new members, enforcing rigorous standards via CPD and adherence to ethical codes? They also offer effective routes for businesses to address concerns or grievances regarding their tax agents.
We feel that the diversity of the tax practitioner market requires a wide variety of professional bodies to regulate and support practitioners. For example, some practitioners will specialise in high complexity tax issues, such as complex VAT arrangements or inheritance tax, while other practitioners will focus on lower complexity issues. One size does not fit all.
Government should not seek to eliminate this diversity, nor should it prevent new organisations from becoming recognised professional bodies. To maintain this diversity, we would like to see HMRC working with existing professional bodies to help develop appropriate standards proportionate and workable for all sectors of the market.
We recognise that change is afoot with the goal of a more positive future. This has prompted us to look at how the CPAA can stay ahead of the game and perform at our best. We are working to ensure that our systems and processes are as robust as possible. This may require some investment to strengthen what we have, to meet the heightened standards expected by HMRC and the industry – but we can see how worthwhile this will be.
In addition, we will ensure all practising members are registered as tax agents. HMRC wants to mandate that all tax agents registered with them are members of professional bodies. Currently, many CPAA members are not part of a Professional Body Supervisor (PBS) for anti-money laundering supervision, instead being registered directly with HMRC. We will ensure that our members can continue to practice without interruption.
While the CPAA acknowledges the need for improvements and anticipates changes ahead, we remain confident in our ability to adapt and thrive in the evolving regulatory landscape. We will respond to the Government’s consultation and we encourage members to actively engage in the consultation process too. It is only by being part of the conversation that we can collectively contribute to shaping the future framework of the tax advice market.
How to get involved:
- Email Lee Haywood, CPAA Operation Manager/Company Secretary, lhaywood@cpaa.co.uk with your views
- Respond directly to the consultation by clicking on this link. The consultation is open until 29th May.