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Tax regulation: change must be in the public interest

Author: ICAEW Insights

Published: 29 May 2024

The government’s consultation for improving the tax advice market came up with three options. Of these, ICAEW prefers mandatory membership of a professional body, but only if it is appropriately designed and scoped.

The government’s consultation for improving the tax advice market came up with three options. Of these, ICAEW prefers mandatory membership of a professional body, but only if it is appropriately designed and scoped.

ICAEW has responded to the government’s latest consultation on raising standards in the tax advice market. The consultation sets out three possible options for a strengthened regulatory framework. It also proposes that tax practitioners will be required to register with HMRC.

The government’s options for regulation

Option one is mandatory membership of a recognised professional body. Professional bodies would monitor and enforce standards and raise those standards where necessary. 

Under option two, tax practitioners would be required to be a member of a recognised professional body, or be supervised by HMRC. HMRC would take a greater role in maintaining and raising standards of unaffiliated tax practitioners.

Option three is regulation by a government body that sets, monitors, enforces and raises standards in the market. This approach would see the introduction of a new independent regulator – or an expanded remit of an existing regulator – to regulate all tax practitioners.

In its article on the publication of the consultation document, the Tax Faculty provided more information on each option.

Any change must be in the public interest

ICAEW supports the government’s intention to raise standards in the tax advice market. However, it is important that any changes do not create more problems than they solve, and are made wholly in the public interest. 

Standards should be raised so that any additional cost passed on to taxpayers is the minimum that is necessary. All of the options have the potential to increase costs for taxpayers, which may make tax advice and services unaffordable for most taxpayers, potentially increasing the tax gap. 

ICAEW believes that there must be a level playing field for all individuals who provide tax services. The current proposals omit unaffiliated agents who do not interact directly with HMRC. Also, they do not extend to tax practitioners within regulated professions such as legal services, insolvency and independent financial advisers. 

ICAEW’s preferred option

ICAEW prefers the first of the government’s three options (mandatory professional body membership), but only if such a model is appropriately designed and scoped. ICAEW believes it is very unlikely that many of the current unaffiliated tax practitioners would meet its entry requirements, as these would not change. 

Option two would create a conflict of interest for HMRC and so is not a feasible option. ICAEW does not support option three as the costs for taxpayers of creating and operating an independent regulator would be too great. Also, recruiting the expertise and experience for it to work effectively would be a significant challenge.

If option one is adopted, ICAEW believes that the government should protect the titles ‘tax accountant’ and ‘tax adviser’ in the legislation. The legislation should make it illegal for a person to provide tax advice and services without being a member of an approved professional body.

Agents should be required to register with HMRC

ICAEW supports mandatory registration for all tax practitioners who interact with HMRC. Strengthening the controls on access to HMRC’s agent services is an important first step towards ensuring tax practitioners meet existing basic standards before being able to interact with HMRC on behalf of their clients. However, changes to agent registration must reflect the needs of firms of all sizes.

Care needs to be taken in the design of the model. There must be appropriate governance set up within HMRC including training and oversight, as well as an appeals process before a decision is made to exclude anyone from registration. Stopping a tax practitioner’s registration can cause significant and potentially critical damage to their business. Furthermore, the impact on the taxpayers that they act for must be considered. Taxpayers must not be penalised for missing deadlines because the tax practitioner cannot act on their behalf.

Alan Vallance, ICAEW Chief Executive, said the chosen approach must raise technical and ethical standards among tax practitioners. It should also protect consumers from incompetent or unscrupulous practitioners, without increasing costs to put professional advice out of the reach of taxpayers.

“While we think there are issues with all of the proposed options, if HMRC does decide to introduce tax regulation, our preference is for mandatory membership of a professional body but only if the model is appropriately designed and scoped. If not, there is a risk that costs could be pushed down to consumers, making tax advice and services unaffordable and therefore undermining the objective of regulation.”

The Tax Faculty

ICAEW's Tax Faculty is recognised internationally as a leading authority and source of expertise on taxation. The faculty is the voice of tax for ICAEW, responsible for all submissions to the tax authorities. Join the Faculty for expert guidance and support enabling you to provide the best advice on tax to your clients or business.

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