Government announces next steps on raising standards in tax services
13 November: HMRC is to increase awareness of its standard for agents and has pledged to continue working with professional bodies in its efforts to improve standards in the tax advice market.
HMRC has outlined four key steps it will be taking to improve standards in the tax advice market, which are:
- raise awareness of its standard for agents and review its enforcement,
- consult on requiring tax advisers hold professional indemnity insurance (PII),
- work with professional bodies, and
- tackle the cost of tax repayment agents.
The steps were published alongside a summary of responses to its call for evidence into raising standards in the tax advice market published in March 2020. The stated aim of the government is to help taxpayers make informed decisions when seeking tax advice, so giving them reliable reassurance that the advice they receive is competent, professional and trustworthy.
The consultation was launched in response to the recommendation of Sir Amyas Morse. In his detailed review into the Loan Charge, published in December 2019, Morse suggested that government should publish a new strategy addressing how it will establish a “more effective system of oversight” for tax advisers.
The government received 83 written responses to its call for evidence, which included 24 from professional bodies and 18 accountancy firms. ICAEW Tax Faculty’s response was published as ICAEW Rep 45/20.
The summary of responses makes it clear that HMRC wants to work with the professional bodies to raise standards and that the Professional Conduct in relation to taxation (PCRT), to which ICAEW is a signatory, provides a good framework for setting and maintaining standards.
In the light of the responses received, the government has proposed four steps to improve standards and trust in the tax advice market: The Tax Faculty details the steps and what they mean for ICAEW members:
1. Raise awareness of HMRC’s Standard for agents and review how it is enforced.
HMRC’s Standard for agents is based directly upon the principles and standards in the PCRT, which ICAEW members will already be familiar with, as it forms part of ICAEW’s professional code.
Given the PCRT imposes more requirements than HMRC’s standard, this step will therefore have the most impact upon the approximately 30% (according to HMRC figures) of tax advisers who are not members of a professional body.
HMRC will take action to raise awareness of the standard and publish the results of an internal review of the powers currently available to HMRC that help enforce it.
2. Consult on a requirement for all tax advisers to hold PII
HMRC believes that there are many potential benefits to advisers being required to hold PII. It should drive up standards and potentially remove the high-risk advisers who may struggle to obtain insurance, as well as providing redress for taxpayers when things go wrong.
The consultation will also consider a formal definition of tax advice and what activities should be in scope. Again, given that ICAEW members in practice must already hold adequate PII, this requirement should not impact ICAEW members.
3. Working with the professional bodies.
The government will continue to work in partnership with adviser professional bodies to understand the role they play in supervising and supporting their members and raising standards in the profession.
ICAEW welcomes this development which would build upon existing processes and oversight that the professional bodies are able to provide.
4. Tackling the cost of tax repayment agents.
The government is concerned about the cost to taxpayers of advisers who are claiming tax refunds on their behalf and intends to review options to tackle this.
This step is clearly aimed at “high-volume repayment agents” who do bulk claims and charge a percentage of the tax repayment. At this stage it is not clear what the options are that the government is considering.