Edward Troup sets out vision for future of tax advisers at CIOT roundtable

After a four decade long career working in tax, outgoing HMRC chairman Edward Troup, joined a CIOT roundtable in December to set out his thoughts for the future of the tax authority and the inter-relationship of tax advisers with HMRC and clients over the next few years, highlighting the increasing need to monitor  the quality of advisers and acknowledging the impact of Making Tax Digital

Troup was speaking ahead of his retirement from HMRC at the end of December. At the event he talked about how he saw HMRC and the tax profession developing in the future, including his belief that government was likely to be tempted to put further responsibilities on tax advisers in the future.

Most eye-catchingly he thought one possible direction was segmentation of tax agents, categorising them with different levels of ‘risk rating’, with their clients being scrutinised accordingly.

Troup began by reflecting on the early part of his nearly four decades in and around tax, observing that he was marked out for tax when he qualified as a lawyer on the day in 1981 when the Ramsay verdict (a landmark tax avoidance case) was delivered in the House of Lords.

Since then he had become involved with the Law Society and Institute for Fiscal Studies, had advised Kenneth Clarke during his chancellorship and, after a further spell in practice, lately returned to the Treasury and to HMRC. Overall he thought he had been ‘extraordinarily lucky’ to have had such a career.

Setting the context, he said HMRC was trying to administer a system which had its origins back in the 19th century (and in some respects back in Tudor times) and was ‘not exactly burnished and shining for the modern age’. The current context was high demand from citizens for high quality – and therefore expensive – public services and ever greater globalisation, including the rise of digital businesses.

Taypayers are not ‘customers’

Troup defended HMRC’s sometimes controversial description of taxpayers as ‘customers’ saying that he genuinely believes the tax authority is a customer-centric business.

He described the customer looking at the totality of his or her own affairs and wanting to deal with the tax system as a whole.

This affected the whole of HMRC’s ‘plumbing’ and was central to the thinking around Making Tax Digital.

He acknowledged that digitalisation had been ‘a bit of a journey’ for the department.  It had begun as just digitising paper – providing forms that could be downloaded, printed out, filled in and sent to HMRC for them to scan and upload at their end.

Making Tax Digital, by contrast, went far further, and was about reducing tax payments to the same broad process or experience as online banking or dealing with your gas bill. He described this journey as ‘completely unstoppable’.

Rejected excuses for tax avoidance 

The ‘extraordinary societal changes’ in attitudes to tax avoidance were also discussed by Troup, who reminisced that in the early days of his career there were advisers who worked on avoidance schemes which ‘literally came in booklets with perforated tear out pages’.

The client ended up with ‘a stack of 20 pieces of paper which amounted to the totality of the transaction’. Any client who came to a professional adviser with something like this now would be laughed out of the door, he said.

This led him to the question: are there things taking place now – schemes being advised on -  where people will say, in 30 years’ time, do you know what they were doing in 2017?

While we might not see the same extent of changes in attitudes over the next 30 years as over the last 30, he thought it was unlikely that attitudes in 30 years’ time would not have moved on at all.

HMRC had ‘ridden the wave’ of this attitudinal change, argued Troup, identifying avoidance schemes sooner and closing them down quicker. He also praised the Professional Conduct in Relation to Taxation (PCRT) rules followed by members of CIOT, ATT, ICAEW, and other professional bodies), saying he genuinely believed it was ‘a great thing’.

However, he added, there remained advisers out there still promoting avoidance schemes. Often these advisers argued: ‘if I didn’t supply this market somebody else would’, but he rejected this an argument.

Troup also criticised a subset of advisers who have a ‘business model that is based on the inefficiency of manual record-keeping’.

Emphasising that HMRC do see an ongoing role for advisers, he thought there was no place in the modern world for an adviser that makes their money from the inefficiency of their clients. A fair chunk of the resistance to MTD came from such advisers, he thought.

Adviser versus client relationship

Finally Troup turned to the relationship between an adviser and his or her client. To what extent can you do your job by pulling together a return to HMRC which accurately reflects what you have been told but takes no responsibility for what is behind that, he asked.

To what extent does a good adviser have responsibility to go further and say to their client, on occasion, ‘frankly this doesn’t look plausible’?

He threw the question out to the profession, saying: ‘I do think that the adviser profession should think to what extent they should share responsibility for what lies behind returns.’  He personally described it as placing a greater degree of responsibility on those who know taxpayers better.

During discussions, the outgoing HMRC chair elaborated on what he thought this greater responsibility could mean in practice.

‘The quid pro quo of the logic of what I imply, which is that actually we should be holding professionals more to account for responsibility for the behaviour of their clients, which could start with neglecting to call out something you knew is wrong, right the way through a spectrum through to actively taking responsibility for what you were being told being right and in accordance with the tax rules.

‘I think that sits quite well alongside a model which risk rates the advisers and which fits into our compliance strategy which is effectively to give differing degrees rules of engagement – I use the words neutrally – for advisers and hence their customers who have reached different levels of risk-rating.’

Taken to its ‘logical extreme’, he could envisage a scenario where firm A might get five stars for the quality of its consistent auditing of its clients, while firm B were not rated so highly.

The consequence of this would be that HMRC would spend more time looking at the tax returns of firm B’s clients while adopting a lighter touch to firm A’s. Such an approach was not in immediate prospect but he felt there was ‘a really interesting debate’ to be had on this, acknowledging that it might be controversial and different parts of the tax profession might hold differing views.

‘Differentiating our degree of scrutiny of a client because of the historic, assessed performance of the adviser… is quite a provocative statement when you put it like that… there is scope for discussion.’

In his closing remarks Troup painted a picture of a ‘brave new world’ where the taxpayer ‘effectively just runs sensible accounting software or is linked up to an app on their iPhone and every few months we tell them this is where you are and here’s what your likely bill is going to be for the year. Where do the advisers fit in? They do, in all sorts of ways.’

Tax advisers – where next?

He said professional tax advisers need to ‘think proactively about where you fit in. Clearly there would be a role helping clients to get into the right place, he said, but HMRC’s perspective is that ‘we do not want to have to check individual returns. We want to know that the integrity of the data is sound’.

HMRC was already a long way down that road with large businesses, he said, checking the integrity of the system and acting ‘more like system auditors’. Segmentation of the agent community could take that further.


Edward Troup retires from HMRC on 31 December 2017 and is succeeded by Jim Harra, tax assurance commissioner and former director general of customer strategy and tax design. Harra’s post is currently taken by an interim director general, David Richardson, formerly director of counter avoidance.

HMRC has confirmed that a full-time appointment to replace Harra will be made in early 2018.

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