Regulating Tax Advisers

Mark McLaughlin CTA (Fellow) ATT TEP looks at the recent HM Revenue & Customs consultation document on the policing of tax agents.

Introduction

HM Revenue & Customs (HMRC) seems determined to adopt a ‘policing’ role in respect of tax agents. A further HMRC consultation document (‘Working with Tax Agents: The Next Stage’) was published with the Pre-Budget Report 2009.

There are two main categories of tax agents; those who are affiliated to a professional body, and those who are not. HMRC’s first consultation considered the possible registration and regulation of all tax agents, but this idea has not been taken any further.

Reports to Professional Bodies

HMRC apparently considers that professional bodies can play a part in identifying and addressing poor work by their members. HMRC would seemingly like to develop mechanisms to report agents to their professional bodies in certain circumstances. However, HMRC’s preferred approach would initially be to approach tax agents who make honest but repeated mistakes, or demonstrate a lack of technical competence, to reduce the issue. A formal report to the professional body might then follow if the issue were not resolved and/or the agent refused to co-operate with HMRC. If the problem persisted, HMRC would consider ‘civil remedies’ against the agent.

There is some uncertainty over whether HMRC has the legal right to report agents to the professional bodies in the first place. HMRC points out that it already has the statutory power to disclose information to professional bodies about misconduct by its members relating to a function of HMRC (Commissioners for Revenue and Customs Act 2005 s 20(3)).

However, it has been pointed out that reports to professional bodies may cause a breach of confidentiality. Although s 29(3) of the above Act allows HMRC to disclose information to ‘…a body which has responsibility for the regulation of a profession’, the ICAEW, CIOT and others do not regulate their members as such (‘Trust in Transparency’ by Robert Maas, Taxation 14 January 2010.)

Non-Member Agents        

HMRC needs a different approach to deal with agents who are not members of a professional body. A financial penalty regime is therefore being considered in those circumstances.

Deliberate Wrongdoing

Agents involved in deliberately filing incorrect returns or other wrongdoing face possible criminal proceedings under the proposals. Alternatively, ‘civil remedies’ would apply. These include wider access to the agent’s working papers, a civil penalty regime, and the possibility of ‘naming and shaming’, i.e., HMRC publishing details of agents found guilty of deliberate wrongdoing.   

The consultation document can be downloaded from the HMRC website. The consultation period initially ran to 3 March 2010 but following strong representation from the professional bodies, will now remain open - but only as regards aspects relating to 'deliberate wrongdoing' - until 28 April 2010. Tax advisers therefore still have the opportunity to express their views on what is clearly a very important issue.

The above article is reproduced from Practice Update (January/February 2010), a tax Newsletter produced by Mark McLaughlin Associates Limited. To download current and past copies, visit: Practice Update.

Article Added Sunday, 07 March 2010

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