UK: HMRC launches new crackdown on tax avoidance

The government is seeking to clampdown on dodgy tax agents with plans to strengthen the regulatory framework and even create an independent regulator.

The objective is to drive out those who offer their clients bad tax advice.

Nigel Huddleston, financial secretary to the Treasury, said: “A minority of practitioners who are incompetent, unprofessional or unscrupulous who continue to operate, harming their clients and the public finances’, said Nigel Huddleston MP, financial secretary to the Treasury.

“The government has taken recent action to tackle the most egregious behaviour in the market, particularly from promoters of tax avoidance and repayment agents, and has shifted power away from repayment agents back towards the taxpayer. But more needs to be done.”

Although levels of non-compliance are generally higher among taxpayers represented by an unaffiliated tax practitioner than those represented by a professional body member, there are still “unacceptable levels of non-compliance among taxpayers using agents who are members of professional bodies”, the Treasury said.

“The government’s conclusion is that professional body membership improves compliance, but on its own is probably insufficient.”

HMRC has launched a consultation, Strengthening the regulatory framework in the tax advice market, on wide-ranging measures to clamp down on rogue tax advisers, who provide tax advice to clients without any professional qualifications.

The consultation seeks views on potential approaches to raising standards; whether the government should pursue introducing a requirement for paid tax practitioners to be a member of a recognised professional body that supervises their professional standards; how professional bodies and the government can work together to raise standards of tax practitioners; which groups of tax practitioners should be in scope or excluded from the proposed option; a first step of mandating registration with HMRC for tax practitioners who wish to interact with HMRC on behalf of their clients, and the requirements that HMRC should establish to enable registration.

The consultation is aimed at anyone who may receive or provide tax advice or offers services to third parties to assist compliance with HMRC requirements. For example, accountants, tax advisers, legal professionals, payroll professionals, bookkeepers, insolvency practitioners, financial advisers, customs intermediaries, charities and other voluntary organisations that help people with their tax affairs, software providers, employment agencies, umbrella companies and other intermediaries who arrange for the provision of workers to those who pay for their services, people who engage workers off-payroll, promoters, enablers and facilitators of tax avoidance schemes, professional and regulatory bodies, and clients, or potential clients, of all those listed above.

There are approximately 85,000 tax advice firms in the UK, but “almost anyone can start providing tax advice and services to clients and can do so with limited or no oversight if they are not a member of a professional body”, HMRC said.

“The lack of consistent market oversight results in persistent substandard tax advice and services leading to higher levels of tax non-compliance. In turn, these failures undermine people’s trust in the tax system and result in increased costs for clients and HMRC.”

The idea of regulating tax advisers last gained traction in 2015 when the Treasury drew up plans to impose tough rules on the tax and accountancy profession. In the end the government backed down as the various institutes tightened up the Professional Code of Conduct in relation to Taxation (PCRT).

A tighter framework was also outlined by the Conservatives in their 2017 party manifesto and this led to a consultation on raising standards in the tax market. The outcome of this was a call for tax practitioners to hold professional indemnity insurance.

The latest consultation takes regulation to a new level, setting out the government’s intention to raise standards in the tax advice market through a tougher regulatory framework.

It sets out three possible approaches to strengthening the framework: mandatory membership of a recognised professional body, joint HMRC/industry enforcement, or regulation by a separate statutory government body.

The consultation, which runs for 12 weeks, is extensive and includes 30 specific questions. It is open until 29 May 2024.

Glenn Collins, head of technical and strategic engagement, ACCA UK, said: “While the move would be broadly welcomed by ACCA members it is imperative that this is done in a cost effective manner. Such a move should increase the quality of tax advice which taxpayers receive and provide greater assurance to HMRC.

“However, HMRC will have to be clear and careful on how it defines professional body so those with clear accountability, and public benefit remit backed by clear and transparent standards are included. We will carefully support and advise HMRC to ensure the greatest possible competition and choice in the tax advice market for taxpayers while ensuring an appropriate degree of regulation and protection for taxpayers.”