HMRC is seeking views on how to raise and maintain high standards of competence and behaviour in the tax advice market in order to protect consumers and improve compliance
The ten-week call for evidence has been prompted in part by responses to the independent review into the loan charge published in December 2019, where many taxpayers claimed to have acted on advice from their tax agents but appeared to have entered into tax avoidance schemes and to have no redress.
HMRC points out that anyone can set up as a tax adviser and there is no market-wide competence requirement or code of ethics. In his forward Jesse Norman, financial secretary to the Treasury, said: ‘Some advisers are incompetent, some unprofessional, a few actively corrupt.’
The call for evidence asks for views and evidence on several issues including the scope of the market for tax advice and services, and whether there is a significant difference between the two activities; the characteristics of good and bad practice; current government interventions; international models; and possible approaches to raising standards.
It details a range of options, beginning with making more use of current levers such as dishonest tax agent penalties, public interest disclosures and refusal from HMRC to interact with agents digitally in a more effective way.
Other proposals include improving market transparency by, for example, empowering consumers to make better choices through schemes such as kitemarking, and maximising the self-regulatory role of the professional bodies.
The maximal approach would be controlling entry to the market by introducing a statutory body enforcing regulated standards on tax advisers.
Glyn Fullelove, CIOT president, said: ‘It appears that political support for greater regulation of tax services is growing. Indeed, people often express surprise that comprehensive regulation does not exist already.
'But regulation only makes sense if it can be effective in producing improvements and if it can achieve this at proportionate cost.
‘That is why we believe working through professional bodies to strengthen consumer and exchequer protection, rather than trying to invent a new regulator, is the best approach. We look forward to working with government to achieve this.
'Regulation must deal with the fact that some 30% of registered tax agents are outside any professional body and consequently neither their clients nor HMRC have any recourse to professional body disciplinary schemes in respect of their work.
‘Additionally many, perhaps a majority, of those who devise and promote avoidance schemes are not tax agents at all. Any reform in this area needs to recognise this and to avoid either putting competent and ethical tax advisers out of business or pushing more tax advisers to operate outside professional bodies.'
The call for evidence closes on 28 May.
Call for evidence: raising standards in the tax advice market