Over the course of the last few weeks, we have examined two of the proposals in HMRC’s long planned consultation “Raising standards in the tax advice market” which contains three potential options to regulate the UK tax agent market. This week we are seeking your feedback on option three, regulation by a separate statutory government body, in addition to approaches to strengthen the controls on access to HMRC’s services for tax practitioners. HMRC is also seeking to draft a legislative definition of a tax practitioner to support implementation and sets out the categories of who should be regulated in Chapter 8. Please share your views on this consultation by Tuesday 7 May 2024.
Regulation by a separate statutory government body
More information on this option is set out in Chapter 6. This option would see the introduction of a new independent regulator or expansion of the remit of an existing regulator to regulate tax practitioners. According to the consultation, “a single independent regulator would provide consistency across the market. Having an arm’s length body would avoid potential conflicts of interest arising from HMRC acting as a regulator and avoid a potential race to the bottom.”
The government regulator would set standards, carry out checks on tax practitioners seeking to be regulated, and ensure they meet the required criteria. This could include conducting an annual renewals process to ensure all information is up to date and correct. As is common with professional regulators, this body could have a role in supervising tax practitioners including inspections of tax practitioners on a risk-assessed basis to check they continue to meet expected standards, investigating issues and complaints, and enforcing sanctions.
This regulatory body could introduce “customer support routes” including establishing a complaints process, ensuring transparency, and supporting redress claims. The regulator could be responsible for providing support and guidance to the profession and ensuring tax practitioners receive updates on the latest changes in the tax system.
Within this model there are options about how the regulator could be set up and the role that current professional bodies could play. Current professional body members could be automatically registered with the regulator as they have already undergone a series of checks and professional bodies could retain their role as providers of qualifications and ongoing practice support for their members.
The consultation considers that establishing a new regulator in this way “would provide the opportunity to create a tailored regulatory solution for the market which is adaptable for future needs.”
However, potential problems with this model include that adding a new regulator to an already complicated regulatory landscape for tax and accountancy may cause confusion, and this is likely to be the most expensive of the potential approaches, as it would involve costs for the government and for all tax practitioners. The government sees this approach as a fallback option if the professional body lead approach is not practical or effective. Questions 8-10 specifically seek feedback on this approach.
Access to HMRC’s services for tax practitioners
This aspect of the consultation examines the 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.
Alongside the broader proposals on raising standards, the government wants to improve the way that tax practitioners register with HMRC and intends to mandate registration for all tax practitioners who wish to interact with HMRC.
Together with mandated registration, HMRC would automate and streamline the existing registration routes for tax practitioners, with the aim of providing a better service. At the point of registration, HMRC would check that the tax practitioner is compliant with requirements to register for anti-money laundering supervision and is up to date with their tax affairs. HMRC would then periodically reconfirm ongoing compliance with these requirements.
This would aim to provide assurance that registered tax practitioners continue to meet basic standards while interacting with HMRC on behalf of a client.
The government therefore intends to improve registration now, assuring that basic standards are in place for all agent services and is asking for views on the proposal to mandate registration, alongside providing an automated, streamlined way for tax practitioners to register with HMRC.
The consultation recognises that whilst this step by itself is unlikely to fundamentally raise standards in the tax advice market, it would be an essential enabler for a strengthened regulatory framework. It could also be implemented if the broader proposals for a strengthened regulatory framework are not taken forward.
Legislative definition of tax practitioner
As part of this project, the Government also intends to draft a legislative definition of a tax practitioner “as a provider of tax advice and services.” This aspect will be subject to further consultation however the definition will include the following provisions:-
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it will cover the full range of business entities operating in the market, that is, individuals, firms, and sole practitioners;
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the advice or assistance caught will be
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given by way of business, so that friends and family are not inadvertently captured;
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provided in relation to UK taxation; and
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provided directly, indirectly, or at the request of someone other than the client.
The definition will also set out what is meant by advice or assistance. This will include acting on behalf of a client in their dealings with HMRC or another UK tax authority in relation to tax. Depending on the scope of the regulatory framework, it may also include advising a client in relation to tax. Questions 25 and 26 of the current consultation specifically deal with this aspect.
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