Last week we examined option one in HMRC’s long planned consultation on “Raising standards in the tax advice market” which proposes mandatory membership of a recognised professional body and is clearly HMRC’s preferred option. This week we are seeking your feedback on option two, a hybrid regulatory model in of joint HMRC and industry enforcement and encourage you to share your views with us by Tuesday 7 May 2024. Next week’s edition of Chartered Accountants Tax News will set out more information on the final option, regulation by a separate statutory government body in addition to approaches to strengthen the controls on access to HMRC’s services for tax practitioners.
Joint HMRC and industry enforcement
Under this option, HMRC and industry would monitor and raise standards of the market. Unaffiliated tax practitioners would have to be supervised by HMRC and professional body members would be subject to the supervisory requirements of their professional body. Note that this option is unlikely to beHMRC’s preferred option. More information on this option is set out in Chapter 6.
Tax practitioners in scope of the regulatory framework would be required to become and remain a member of a recognised professional body or be supervised by HMRC to provide tax advice and tax services. According to the consultation document, this would provide greater market flexibility as tax practitioners would have a choice of either becoming a member of a professional body or being unaffiliated with any professional body and instead being supervised by HMRC as a tax practitioner.
Professional bodies’ responsibilities would remain the same, which includes maintaining oversight and supervision for their members and ensuring they meet the appropriate standards. They would also remain responsible for acting where members are found to be in breach of the standards required of them. This would build on the supervisory role professional bodies currently undertake to maintain professional standards amongst tax practitioners. They would not be expected to oversee the unaffiliated market. HMRC believes that as for option one, this would have minimal impact on current professional body members who meet expected standards.
Under this approach HMRC would take a greater role in maintaining and raising standards of those tax practitioners who are unaffiliated with a recognised professional body. HMRC would undertake checks of those being supervised, beyond those being proposed under mandatory registration (see Chapter 5). Checks could include adherence to the ‘Standard for Agents’ and/or complete and certify that they have met appropriate continuing professional development requirements. The practitioner would be expected to declare annually that they continued to meet requirements. Additionally, HMRC would carry out ongoing risk-based checks to ensure tax practitioners continued to meet requirements and would be responsible for enforcement when tax practitioners do not comply with standards.
This approach would therefore require investment to expand HMRC’s role beyond its current role of administering the tax system and supervising some tax practitioners for AML. The ability of this approach to raise standards in the market will be dependent on the supervisory role undertaken by HMRC. However, HMRC taking on a strong supervisory role of tax practitioner professional standards whilst administering the tax system could create a conflict of interest. This is because HMRC could be perceived as acting as both judge and jury, as the department would be responsible for checking both tax compliance and setting and enforcing standards of tax practitioners, for example, where there is a difference in interpretation of the law, or where the tax practitioner considers they are acting in the best interest of the client even though HMRC disagrees with the outcome.
Other risks include the added complexity in the market for example, the potential for there to be different requirements and levels of oversight and enforcement for HMRC-supervised tax practitioners compared to professional body-supervised tax practitioners. This could cause confusion and complexity for clients and start a race to the bottom if HMRC and professional bodies had differing requirements. The government would be cautious about creating a dual system of regulation that could undermine the objective of supporting consistent standards and enforcement in the pursuit of creating a level playing field.