Building a better tax system: a proportionate approach to ensuring quality tax advice

As part of its How to Build a Better Tax System project, ICAEW has outlined five institutional pillars that it believes are vital to creating a UK system that is fit for the future. The tax profession is one of those pillars.

Why the tax profession matters

A tax system is only as good as the infrastructure that supports it. Even the most carefully designed tax code, administered by the most capable revenue authority, cannot function if taxpayers cannot access competent and trustworthy advice. The tax profession is not peripheral to the system; it is at the core of it.

Professional advisers translate policy intent into practical action. They help businesses structure their affairs within the law, support individuals through the life events that trigger tax consequences and, above all, make a complicated system navigable for those without specialist knowledge. In the UK, that role matters more than almost anywhere else, because the tax code is among the most complex in the world. Most taxpayers cannot understand their obligations without help, and most businesses cannot comply accurately without support. The capacity and quality of the profession therefore determine whether millions of people and businesses can meet their obligations, claim their entitlements, pay the right amount of tax and plan with confidence.

That creates a clear public interest in how the profession is structured and supervised. When professional standards are high and access to professional tax advice is broad, revenue is collected efficiently, taxpayers are treated fairly and compliance costs stay reasonable. When standards slip or access narrows, revenue is lost to error, and taxpayers who cannot find or afford reliable advice are left exposed to mistakes they could not reasonably have avoided. Rather than risk getting the tax treatment wrong, some taxpayers may decide not to proceed at all with a transaction or venture. Underlying much of this is a further problem: most taxpayers assume that anyone holding themselves out as a tax adviser or tax accountant is subject to professional standards, requirements for technical knowledge and qualifications, regulatory oversight and routes for clients to seek redress when things go wrong. In reality, those titles are not protected and anybody can set themselves up as a tax adviser.

Further, the framework for qualification requirements, standards, regulatory oversight and consumer protection has grown up piecemeal. HMRC estimates that only around 65% of UK tax agents are members of a professional body, leaving a substantial minority operating outside enforceable ethical and disciplinary frameworks. Practitioners affiliated to professional bodies operate alongside unaffiliated advisers, and well-intentioned reforms too often miss their mark – imposing costs on those already subject to regulatory frameworks while failing to address genuine poor practice elsewhere. Getting this right is a precondition for the reforms set out in the other pillars: a simpler code means little if taxpayers cannot find advice to navigate it, and a better-resourced HMRC achieves less if poor advice undermines compliance. The question is not whether to reform the profession, but how to raise standards without increasing the cost of obtaining tax advice.

The diagnosis: a strong market, held to account unevenly

The UK tax profession is the backbone of voluntary compliance. The overwhelming majority of practitioners work to high standards, guided by professional body membership requirements and codes such as Professional Conduct in Relation to Taxation (PCRT). Professional body membership is not simply a qualification: it involves continuing professional development, ethical obligations, disciplinary oversight and, for those in practice, additional safeguards such as professional indemnity insurance, complaints procedures and practice monitoring. While the precise requirements vary between professional bodies, these frameworks protect both taxpayers and the Exchequer. The problem is not the profession as a whole; it is that tax-specific accountability does not reach consistently across the market, and, where it does apply, is not always well designed.

Tax-specific accountability sits on a spectrum, and some of the market falls some way short of the standard the majority already meets. At one end, advisers who design and sell tax planning but never interact with HMRC can remain entirely outside the tax adviser registration requirement introduced by the Finance Act 2026, which turns on whether a person interacts with HMRC on a client's behalf. Most of these are unaffiliated advisers and answer to no professional body, regulator or disciplinary framework of any kind, and the evidence suggests the risk of careless or poor advice is concentrated among them. HMRC’s separate powers targeting promoters of avoidance arrangements can be brought to bear once a specific scheme is identified, but these are discrete enforcement tools, not a system of ongoing oversight – they do not alter the fact that this population operates outside any accountability structure.

Further along the spectrum are advisers who are regulated, but not specifically for tax. They may be subject to professional and ethical requirements, but not including tax-specific competency, continuing professional development on tax matters or ethical standards equivalent to PCRT. The client of such an adviser has recourse for general professional failings, but no assurance that tax-specific standards have been met. In both this case and the previous one, the taxpayer ultimately lacks the same protection – but the cause, and therefore the fix, differs: one is a question of finding advisers with no regulatory home at all, the other of extending tax-specific recognition into a structure that already exists.

Differences between professional routes can also have significant practical consequences beyond accountability itself. For example, legal professional privilege applies in some circumstances to advice given by professional legal advisers but not to professional accountants or tax advisers, creating important distinctions in the treatment of taxpayer communications and disclosure obligations. Any future reforms should recognise these differences and avoid unintended consequences for taxpayer rights and access to advice.

A separate problem arises once an adviser is already within reach of tax-specific accountability: whether the supervision that applies to them is proportionate. The Finance Act 2026 replaced the old “dishonest conduct” regime with a new concept of “sanctionable conduct” – where an adviser does something (or omits to do something) with the intention of bringing about a loss of tax revenue. Government has stated that this is not intended to affect advisers who make mistakes while trying, as the vast majority do, to do the right thing. HMRC’s guidance indicates that a credible view of the law, reliance on published guidance and genuine error would not amount to sanctionable conduct. The professional bodies have nonetheless continued to press for clearer safeguards, and two concerns remain. First, this protection currently rests on guidance rather than legislation, leaving advisers dependent on HMRC’s continued interpretation of a measure the professional bodies consider too broadly drafted. Second, the penalties that attach to sanctionable conduct remain tied to the potential loss of tax revenue rather than to the fees charged – running from £7,500 to £1m for a first offence. For example, where advice relates to a transaction that could affect tens of millions of pounds of tax, penalties linked to the potential loss of revenue rather than the adviser's fees could expose firms to very significant financial risk even where they have acted competently and in good faith. This risks making complex work disproportionately costly to advise on and discouraging advisers from operating in areas where expertise is most needed.

These problems pull in opposite directions. Parts of the market are subject to significant oversight while other parts of the market are under-supervised: responsible practitioners face mounting compliance burdens, while those causing genuine harm often operate beyond the reach of oversight. The result is higher costs for compliant firms, gaps in consumer protection and competitive distortions that disadvantage those operating to the highest standards and push up the cost of tax advice for taxpayers wanting to pay the right amount of tax.

A profession in transition

These problems are being compounded by rapid technological and market change. Artificial intelligence tools are beginning to take on quasi-advisory functions; offshoring and outsourcing are reshaping how services are delivered; and software-led compliance is automating routine tasks while creating new risks when tools embed poor advice or fail to flag errors.

Technology also offers opportunities. Digitalisation enables more effective risk-based interventions by HMRC, particularly through unique agent identifiers attached to tax returns, allowing HMRC to track patterns, spot emerging risks and target intervention where it is most needed. Better information sharing between HMRC and professional bodies could support that approach, enabling early identification of poor practice and proactive support rather than reactive enforcement.

A durable framework must anticipate these shifts. If the regulatory perimeter is drawn narrowly around today’s delivery models, tomorrow’s risks will simply relocate beyond it. The framework needs to be technology-neutral and flexible enough to evolve as the market evolves.

International experience offers useful lessons. New Zealand's system relies on a voluntary registration status with its Inland Revenue, tied to specific benefits such as extended filing deadlines, combined with the ability for the Inland Revenue to decline or remove that status where a practitioner poses a risk. Albeit that it operates in a smaller and more homogenous market, this shows that a lighter-touch, relationship-based model can support proportionate oversight without a compulsory licensing regime. More rigid regimes, by contrast, risk raising costs and reducing access without matching improvements in quality. The UK should learn from jurisdictions that have raised standards while keeping the market accessible, rather than importing models designed for different market structures and regulatory cultures.

The public-interest test

Every proposed reform should be judged against one question: does it improve outcomes for taxpayers without making competent advice unaffordable? Raising standards matters only if ordinary individuals and businesses can still reach the advice they need. Protecting consumers is meaningless if protection prices most people out of the tax advice market.

Reforms that fail this test, however well-intentioned, risk doing more harm than good. The international evidence on occupational licensing is clear: blanket requirements imposed without careful calibration tend to raise costs, reduce access and entrench incumbents at the expense of new entrants and innovation. In the tax context, poorly scoped regulation could drive up costs for compliant firms, reduce capacity and push vulnerable taxpayers towards unregulated operators or into attempting to solve complex tax matters themselves. This matters because HMRC’s tax gap analysis points to significant compliance challenges in the small business population, particularly in corporation tax. If reforms make professional advice less available or less affordable, they risk worsening the very errors and misunderstandings that contribute most to the tax gap. Small and medium-sized enterprises, which depend on affordable advice, would be the most exposed. The challenge is to raise the floor without lowering the ceiling: to address poor practice where it exists while preserving the high-quality advice the majority of the profession already provides.

The solution: a framework for a professional market

ICAEW argues for a framework built on three complementary elements, each designed to reinforce the others. The starting point should be to build on the existing infrastructure of professional bodies, rather than create new structures from scratch. The emphasis throughout is on targeted, proportionate supervision and oversight that extends effective safeguards to the unaffiliated minority, rather than imposing additional burdens on a compliant majority who already meet robust standards.

While successive governments have considered greater regulation of tax advisers, the current Government has indicated that it does not intend to introduce a new statutory regulatory regime during this Parliament. The focus should therefore be on building on existing professional body frameworks and HMRC’s tax adviser registration regime, improving coverage and standards within the current framework, and ensuring that any future reforms are evidence-based and proportionate.

The first element is to professionalise the market by protecting the public and closing the coverage gap. The titles “tax adviser” and “tax accountant”, and their cognates, should be reserved for those who meet specified standards of qualification, ethics, continuing professional development (CPD), professional indemnity insurance (PII) and a disciplinary and enforcement framework through recognised professional bodies – paired with a public awareness campaign so consumers understand the difference between advisers subject to recognised professional standards and those operating outside of that framework.

Rather than build a costly new regulator, ICAEW argues for building on the existing infrastructure of recognised professional bodies. Professional bodies wishing to oversee tax advisers should meet clearly defined recognition criteria covering ethics, CPD, PII, complaints handling, disciplinary arrangements and cooperation with HMRC. While ensuring a consistent minimum level of taxpayer protection, the framework should allow bodies to retain their own governance and qualification structures. Bodies should not be required to lower existing entry standards to accommodate unaffiliated practitioners; the purpose is to raise the floor, not to dilute what already protects the public.

A realistic transition is essential. Many advisers who work to high standards do not currently hold formal qualifications, so a well-designed legacy scheme should let experienced practitioners demonstrate competence through alternative routes – portfolio assessment, professional references and evidence of continuing development – over a transition period of at least five years, once training and practising-certificate timelines are accounted for. That pathway must be rigorous, independently assessed and time-limited, not a backdoor for those unwilling to meet professional requirements. Once transition is complete, advisers holding out as a “tax adviser” or “tax accountant” outside the recognised supervisory framework should be subject to sanctions that act as deterrent, with HMRC or a designated unit actively monitoring the perimeter; without enforcement, an underground market will develop alongside the regulated one.

The second element is to make registration genuinely universal and transparent, while ensuring that monitoring and intervention are risk-based. The new requirement is a significant step, and the single mandatory digital registration system HMRC has introduced to replace the previous patchwork of agent service registrations is welcome. But because the obligation turns on interaction with HMRC, the framework should be kept under review to ensure it covers material risks in the wider market, including for example advisers who design planning without interacting with HMRC. The gateway should be co-designed with the profession and backed by clear service standards, transparent criteria for refusal or removal from the register and robust independent appeal routes before suspension can apply. As software and AI increasingly perform functions that look like advice, the framework should include powers to bring such tools within scope where they cross from passive assistance into active advice.

The third element is proportionate accountability as a backstop to professional standards, not as the starting point for reform. Advisers who act dishonestly, intentionally facilitate non-compliance, or deliberately seek to bring about a loss of tax revenue should face appropriate sanctions designed to change behaviour. Equally, good-faith differences of legal interpretation and reasonable professional judgement should never be treated as misconduct. A framework that treated every adverse tribunal decision as potential misconduct would chill professional judgement and push advisers towards excessive caution, harming the clients who most need robust advice. Penalties should be proportionate to the adviser’s conduct and role, with care taken not to make complex work uneconomic or to increase the cost of obtaining legitimate advice on difficult matters. The heaviest sanctions, including criminal penalties, should be reserved for objectively defined, marketed avoidance schemes and the promoters who design them, not for advisers helping clients navigate genuine uncertainty.

Before adding further powers, government should review whether the existing powers and penalties framework is coherent, necessary and effective. The answer to each compliance concern cannot simply be another HMRC power layered on top of those already in legislation. Unused, duplicative, or poorly understood powers add complexity and cost without necessarily improving behaviour. A better system would periodically review, consolidate and, where appropriate, sunset powers that are no longer needed.

The risk of partial reform

These three elements are complementary, and their value lies in being implemented together. Each addresses a weakness the others leave exposed: protecting the titles tax adviser and tax accountant closes the coverage gap but means little without registration that reaches the whole market; registration identifies who is operating but cannot raise standards unless title protection and recognised-body oversight sit behind it; and proportionate accountability deters misconduct only if the first two define who is accountable and to what standard. Pull any one out and the others weaken.

That makes partial implementation the principal risk. The parts of the package that expand HMRC’s powers and raise revenue have already been enacted, while the parts that protect the public and the profession have not: sanctionable conduct and registration are now law, but the titles remain unprotected, membership of an appropriate professional body is still not required and penalties are still tied to potential lost revenue rather than fees. A programme assembled in that order tackles the symptoms HMRC can see while leaving the structural gap – the unaffiliated minority where poor practice is concentrated – largely untouched. The case here is not for one change above the others, but for a coherent package in which professional standards, registration and proportionate accountability advance together. That coherence should extend to the wider powers and penalties framework: new powers should not be introduced in isolation where existing measures could be better used, simplified or retired.

A profession that strengthens the system

A well-supervised, accessible profession amplifies the benefits of reform elsewhere. When HMRC's digital services improve, advisers can use them to serve more clients better. When policymaking becomes more stable and coherent, the profession can invest in training, guidance and tools with confidence that the rules will hold. And when standards are clear and consistently applied, taxpayers and HMRC alike benefit from better compliance and fewer disputes.

The UK's tax profession is a genuine national asset, and the export of high-quality advice supports inward investment. The task is not to restrict competition but to ensure that the choice of a tax adviser is based on quality, transparency and ethical service, with the public able to distinguish advisers operating within a recognised professional framework from those outside it. HMRC has a part to play in embedding this distinction and supporting taxpayers to act on it. Once that distinction is meaningful and visible, taxpayers will be far better placed to choose an adviser with confidence, rather than relying on an assumption of protection that, at present the system does not deliver. Reaching that point requires tax advisers, HMRC and taxpayers to each play their part.