Introduction

The Northern Ireland Tax Committee of Chartered Accountants Ireland is pleased to have the opportunity to comment on the above consultation launched on 19 March 2020. Information about Chartered Accountants Ireland and the Northern Ireland Tax Committee is provided on the previous page. We would be happy to discuss any aspect of our comments herein and will continue to participate in any further consultations/initiatives in this area as this project develops in the coming months.

The Committee recognises this consultation as being one of the most important launched for agents in recent years and as such has sought feedback from our wide membership base in compiling this submission.

This Consultation is described as a Call for Evidence. However, it strikes us that HM Revenue & Customs (“HMRC”) itself is best placed to identify relevant evidence of standards and the composition of the UK tax advice market. In fact, what is probably even more striking is that the current consultation is borne out of a very specific issue; the promotion of disguised remuneration schemes as set out in the Sir Amyas Morse’s recommendations in his December 2019 “Loan Charge Review”.

As a Professional Body, any evidence we have of standards is very limited and relates only to the small number of cases investigated by this Institute’s Professional Standards Department when a complaint is received about one of our members. More details of the work of the Professional Standards Department is contained in its most recent annual report. Given the very limited number of cases which result in a sanction on our members, it is for this reason that this submission does not include evidence but examines the consultation questions along its general themes.

Obtaining and retaining membership of Chartered Accountants Ireland

On 6 December 2018, Dr. Brian Keegan, Director of Advocacy and Voice with this Institute met with Steven Taylor, former Head of Agent Strategy with HMRC, to discuss an ongoing project examining potential options for regulation of the tax profession in the UK.

Subsequent to that meeting we then wrote to Steven in February 2019 setting out more information on the route to obtaining qualification as a Chartered Accountant with Chartered Accountants Ireland and how membership of this Institute is retained once an individual is admitted as a member. For information, a copy of that submission is appended to this document as Appendix 1. As set out in that submission, a memorandum of understanding was subsequently signed by this Institute and HMRC in December 2019.

HMRC’s Customer Charter

HMRC recently consulted on a revised Customer Charter. That consultation and the current consultation are inextricably linked as both were borne out of Sir Amyas Morse’s recommendations in his December 2019 “Loan Charge Review”.

In our response to the revised Customer Charter consultation, we expressed a need for the Charter to more explicitly recognise the important role that professionally qualified agents, such as members of Chartered Accountants Ireland play, in supporting taxpayers and businesses in the UK to meet their tax obligations.

In recent years, the role of agents has taken on added importance as additional complexity continues to be added to the UK tax regime. For what would previously have been simple straightforward tasks, many more taxpayers are now turning to agents for support in addressing their tax obligations. This will become even more vital with the announcement on 21 July 2020 that HMRC intends to extend Making Tax Digital (“MTD”) to some of the smallest taxpayers and businesses in the UK beginning with VAT from April 2022 followed by income tax from April 2023.

Our submission in respect of the Charter recommended that it should, at the very least, contain a link to HMRC’s GOV.UK pages which provide taxpayers with more information on choosing an accountant. These pages were updated several years ago by HMRC in conjunction with various Professional Bodies, including this Institute.

At the time of writing this submission, the pages we refer to which contained further links to the various Professional Bodies own membership pages could not be located on GOV.UK. It therefore seems appropriate that a further review of these pages be conducted now, and that they be reinstated with a direct link to the revised Charter. This would also support taxpayers in making informed consumer decisions when engaging the services of an agent.

The impact of complexity

In July 2010, the Office of Tax Simplification (“OTS”) was first established with a remit to identify areas where complexities in the tax system for both businesses and individual taxpayers could be reduced, and then to publish their findings for the Chancellor to consider ahead of his budget. The OTS was then placed on a statutory basis in Sections 184 to 189 of, and Schedule 25 to, Finance Act 2016, which came into effect as from 28 November 2016 by virtue of Statutory Instrument 2016/113.

The OTS board is led by an independent Chair and Tax Director, and has up to six further members, supported by a team drawn from the civil service and the private sector.

Over the course of the last 10 years, the OTS has delivered projects in several areas and most recently has been called upon by the Chancellor to conduct a review of Capital Gains Tax. The NI Tax Committee of Chartered Accountants Ireland has met with the OTS several times over the course of the last few years to discuss its concerns about the increasing complexity of the UK tax regime. In November 2019, the Committee held a half-day work shop in with senior members of the OTS team to discuss tax complexity in four key areas. After that meeting the Committee published the following four position papers setting out its views on tax complexity each of which were discussed with the OTS during that workshop:-

1. Reporting and paying tax in the UK
2. Complexity of UK capital gains tax legislation
3. Complexity of income tax legislation in the UK
4. Complexity of Stamp Duty Land Tax in England and Northern Ireland

The NI Tax Committee continues to reiterate the conclusions reached in these position papers. In particular, UK income tax legislation increases in complexity on an annual basis. This means many more taxpayers struggle to understand supposedly basic areas of the UK tax regime and turn increasingly to agents for support to meet their tax obligations. This reliance on agent support could be reduced if a concerted effort were made to reduce both income tax legislative and administrative complexity. This becomes even more vital with the proposed extension of MTD to income tax from April 2023. Having to navigate continually increasing in complexity income tax legislation in addition to the requirement to make multiple filings to HMRC has the capacity to be extremely challenging for both HMRC, the taxpayer and their agent.

One example of where UK income tax legislation is unnecessarily complex is in respect of the marriage allowance. This allowance initially must be claimed and is only available if certain conditions are met. Once it has been claimed, in future tax years 10 per cent of the personal allowance transfers automatically until one of the parties cancels it or advises HMRC that a change in circumstances means they are no longer entitled to it.

When it was first announced, the number of married couples and civil partners eligible for marriage allowance was estimated at four million1. However, in 2018/19, the estimated number of claimants of marriage allowance (subject to self-assessment returns for this year being finalised) is 1.78 million2.

It is not clear why this gap is so significant. However, the requirement to initially apply for this relief and the need to keep HMRC informed of life changes which impact on its availability means that those who are entitled to it are not often not aware of it, or are put off by having to claim it and keep HMRC informed or do not claim the allowance themselves because they do not understand it thus turning to an agent to claim on their behalf.

A worrying aspect to this is that an online industry has now sprung up around the marriage allowance and several high-volume repayment agents are now in existence who often charge for marriage allowance applications. This is, perhaps, because the allowance must be claimed at the outset. There is therefore a concern that taxpayers could be exploited into wrongly claiming the allowance. This could lead to taxpayers having to make tax repayments and be exposed to interest and penalties.

We therefore recommend that the OTS be urgently tasked with undertaking a review of UK income tax legislation with a view to reducing its complexity prior to the introduction of MTD for income tax. This review should aim to identify quick win areas where taxpayers unnecessarily turn to agents to complete what should otherwise be simple tasks.

Tax policy making approach

The UK Government should also revisit its tax policy making process as updated in December 2017 with a view to identifying where this policy could be fine-tuned to reduce complexity from the very seed of an idea of a supposedly necessary policy change/new policy introduction right through to its implementation and administration as part of the UK tax system.

In recent years, there is an increasing concern that often the consultation process begins at a point where the case for change or introduction of new legislation is assumed to be already satisfied and legislative options and design are included in the first consultation document. One example of this was the 2018 consultation on the Extension of Offshore Time Limits. That consultation, which was the first on this issue, was framed around establishing the legislative design principles for extending the current time limits to 12 years. It was clear from that consultation that the Government had already settled on the policy of extending the time limit having previously not consulted, or invited any comment, on whether the limit should be extended and the case for doing so, if any.

Other recent changes to UK income tax legislation have not been subject to any consultation and often come as a surprise to trusted stakeholders on Budget Day. They may be headline grabbers for the Government on the day (such as the £1,000 trading and property income allowances announced in Budget 2016) but often they add another unnecessary layer of complexity to an already complex tax regime. These two allowances alone added sections 783A through to 783BQ to part 6A of the Income Tax (Trading and Other Income) Act 2005.

Setting aside the welcome postponement of the commencement date of some key tax measures due to the COVID-19 pandemic, HMRC has, in recent years, had to delay the implementation of other key policy changes such as the reverse VAT charge for the construction sector and the commencement of MTD. By and large, these delays were due to feedback from stakeholders and industry representatives who raised concerns that many businesses would not be ready in time to implement the necessary changes to software, systems, and processes that these changes necessitated.

At its highest-level forum with the Professional Bodies in the UK, the Representative Body Steering Group has commenced a process of “horizon scanning” as part of its revised Terms of Reference adopted in 2020. This is essentially a forward look at upcoming changes and issues that will affect agents and software providers.

However, this “horizon scanning” is reactive only in that it examines the changes to be implemented in future once they have already largely been legislated for/decided upon by the Government. The UK Government should consider building in true proactive “horizon scanning” to the tax policy making process via the use of confidential “sandboxes” – this would involve trusted stakeholders and HMRC/HM Treasury discussing proposed legislative changes/new policies in tandem on a confidential basis. This would help to identify pain points, unnecessary complexities, and implementation issues much earlier in the process meaning less risk of delayed introduction of new measures and more certainty for taxpayers.

Professionally qualified affiliated agents

Please refer to Appendix 1 of this submission for detailed information in respect of how membership of Chartered Accountants Ireland is obtained and retained. This submission clearly sets out the high level of education, monitoring and training requirements necessary to obtain admission to membership of this Institute. Once an individual has been admitted to membership, they are then subject to the Institute’s rigorous processes for retaining membership which is administered by the Institute’s Professional Standards Department. This, in combination with our admission to membership requirements, means our members are expected to meet the highest possible quality and conduct standards in the performance of their work, including taxation work.

Where members fall short of those standards, the Institute’s complaints and disciplinary process is designed to investigate and enforce the high standards expected of all members of Chartered Accountants Ireland. HMRC can report perceived breaches of these high standards to Professional Standards under the provisions of Section 20(3) of the Commissioners for Revenue and Customs Act 2005. This legislation is support by a joint Memorandum of Understanding signed by both HMRC and Chartered Accountants Ireland in December 2019. During the process of reaching agreement on this MOU, the Institute discussed in depth with HMRC the rigours of its regulatory function in investigating complaints made against members of this Institute.

In addition, all members of this Institute holding a Practising Certificate must comply with Chapter 7 of the Institute’s Public Practice Regulations and ensure that professional indemnity insurance (“PII”) is in place for the work which they carry out on behalf of their clients. The level of cover and other requirements are set out in the Public Practice Regulations. Any member holding a Practising Certificate without appropriate PII is in breach of the Regulations and can be subject to regulatory or disciplinary action.

Practising Certificate holders are also required to confirm that they are covered by PII on their Practising Certificate Renewal/Application Form. Member firms are asked to submit documentary evidence of their PII cover both with their Annual Return and with the original Practising Certificate Application. This requirement to have appropriate PII cover in place for practising members, the rigorous processes and procedures in place for obtaining and retaining membership of this Institute and the ability of HMRC to make referrals to Professional Standards are all important safeguards providing a combination of consumer protection and redress where one of our members falls short of the high standards expected of them.

Although Chartered Accountants Ireland has not formally adopted the code of Professional Conduct in Relation to Taxation (“PCRT”), this was discussed at length with HMRC who agreed that the guidance contained in the PCRT mirrored that already within the Institute’s Professional Standards and Code of Ethics. In addition, adopting the PCRT would result in practical and regulatory difficulties in adopting a code for our members in Northern Ireland and the UK which their counterparts in the Republic of Ireland would not have to follow. The Institute is also not clear on the value obtained by HMRC from the PCRT in the context of the HMRC Standard for Agents published in 2016; the true standard expected by HMRC from all agents professionally representing or advising taxpayers.

It therefore seems clear to us that this Call for Evidence is not aimed at professionally qualified agents such as members of this Institute. Although the consultation document sets out the wide diversity of the UK tax agent market both in terms of the scope of tax advice/services provided, and who provides them, the genesis of this consultation was Sir Amyas Morse’s recommendations in his December 2019 “Loan Charge Review”. That review very clearly sets out the importance of HMRC targeting unscrupulous rogue promoters of avoidance schemes. We therefore see this as a crucial starting point: HMRC should therefore target its activity aimed at raising standards in the tax advice market at this particular sector and not at professionally qualified affiliated agents:-

1. who are already subject to robust, effective, and active regulation by their own Professional Body;
2. where HMRC have several powers at their disposal to target poor performance: and
3. where HMRC already have recourse under existing legislation, supported by a Memorandum of Understanding, to make a report to their Professional Body.

Targeting activity solely at unscrupulous promoters also solves another problem. Given the diversity of the tax advice market, it would be extremely difficult to arrive at a single solution to raising standards, where this is required.

The consultation document rightly recognises that a one-size fits all approach would be difficult to arrive at. Even if one could be, this would probably result in the need for trade-offs or other unpalatable compromises. One unacceptable trade-off would be to impose additional regulatory burdens on affiliated professionally qualified tax agents who are already regulated as a result of their membership of a Professional Body.

Digitisation

As set out in Chartered Accountants Ireland’s position paper “The Next Financial Year”, the COVID-19 pandemic has broken at least two business ‘taboos’, accelerating the need for digitisation:

• many workers can now be trusted to work productively from home, where their job lends itself to remote working; and
• increasing familiarity with remote working technology means it is now generally acceptable to hold significant business meetings online both to exchange ideas and transact business.

HMRC and HM Treasury’s five to ten-year vision for tax administration “Building a trusted, modern tax administration system”, published after the launch of our Next Financial Year paper in July 2020, also recognises the opportunity presented by further digitisation of the tax system. This vision identifies “that one effect of a system focused on helping people to get their tax right first time is that rule bending and breaking will become harder”. But it would also present HMRC with an opportunity to address some of the current gaps in its ability to capture and analyse data and risk analyse, particularly in the area of rogue promoters, where data capture is built into the development of these services.

HMRC should therefore aim to ensure that further digitisation embeds the type of data capture processes which it is seeking further evidence of under the current consultation on tax agent behaviour. This would also allow more effective targeting of existing/new measures, policies, and resourcing in future against rogue promoters which should ultimately lead to higher standards by driving rogue promoters out of the market. These data capture systems should be designed and considered early in the implementation process.

However, unless tax complexity is seriously addressed, we are concerned that efficient, problem-free, further digitisation of the UK tax system cannot be effectively achieved. For that reason, the UK Government should also develop a roadmap for simplification of the UK tax system over the next five to ten years which should work as a precursor to any new digital services developed.

Proposed options

As set out earlier in this submission, we recommend HMRC targets its activity at rogue promoters and not at affiliated professionally qualified agents which HMRC already has sufficient powers at its disposal to tackle. It is for that reason that we have considered the options, with more focus on those designed to target promoters of tax avoidance schemes and unaffiliated agents.

Option A: better use of HMRC/other government powers

As set out in the consultation document, in recent years, HMRC and the UK Government continues to add to the already extensive powers at their disposal to tackle tax avoidance and rogue enablers and promoters of tax avoidance. We highlight just a selection of some of the most important powers available below.

1. The Disclosure of Tax Avoidance Schemes legislation introduced in 2004;
2. Public interest disclosure legislation in the Commissioners for Revenue & Customs Act 2005 (Section 20(3) allows reporting of misconduct to a professional body);
3. The Dishonest Conduct by Tax Agents legislation introduced by Finance Act 2012;
4. The general anti-abuse rule legislation introduced by the Finance Act 2013;
5. A revised “refusal to deal with policy” for limiting contact with agents as set out in HMRC’S Compliance Handbook at CH870100-870300;
6. The Promoters of Tax Avoidance Schemes legislation in Finance Act 2014;
7. The Serial Tax Avoiders Regime in Finance Act 2016;
8. The Enablers of Defeated Tax Avoidance legislation in Finance (No. 2) Act 2017;
9. The Failure to Correct legislation in Finance (No. 2) Act 2017; and
10. Signed Memorandums of Understanding with various Professional Bodies, including Chartered Accountants Ireland, used to shape instances of reporting to the relevant regulatory function.

HMRC also recently launched a further consultation aimed at Tackling Promoters of Tax Avoidance. This consultation sets out further proposals to tackle promoters, and other enablers, of tax avoidance schemes that aims to reduce their scope to market these schemes. It seeks views on proposals to strengthen the sanctions against those who promote or enable tax avoidance schemes and proposes further changes to several of the powers set out above.

It is clear from the above that HMRC already has extensive existing powers at its disposal to tackle the poor behaviours of rogue promoters of tax avoidance. Taken as a whole these powers could be a powerful force harnessed to drive rogue promoters out of the tax advice market which by its very definition would help raise standards. It is not clear to us, however, that these are being used to their greatest collective effect.

An independent review into the effectiveness of HMRC’s use of these powers as a collective should be undertaken. For example, where a promoter has been charged a penalty under the promoters of tax avoidance legislation, the review should then examine what further deterrent behaviour has been implemented by HMRC such as any steps taken to limit contact with that agent. Sir Amyas Morse, having previously been involved in the loan charge review, would be best place to undertake this review. HMRC and the UK Government should use the existing powers at their disposal to the full extent possible before considering introducing any new powers.

Option B: improve rights of recourse for consumers

The consultation refers to the potential for taxpayers to be “better empowered to deal with problems with their tax adviser by ensuring they have robust rights of recourse when something goes wrong.” Taxpayers who engage the services of a member of Chartered Accountants Ireland are automatically able to access rights of recourse/redress when something goes wrong. The combination of the requirement to have PII to obtain and renew practising certificates and the ability to make a complaint to this Institute’s Professional Standards Department automatically provide the rights of recourse which are so important in consumer protection.

However, unaffiliated advisers and promoters may or may not have PII. This leaves the taxpayer potentially exposed as a consumer. The introduction of compulsory PII would help drive behaviours and ultimately changes in the standard of advice by either raising standards or the exit from the market by some advisers. Unaffiliated agents and promoters of avoidance schemes could find themselves facing higher premia which could be effective in driving certain unacceptable behaviours away. However, the impact on the wider tax agent market, including offshore intermediaries, and on the PII industry would need to be considered.

Where a tax agent is already a member of a Professional Body which requires PII and evidence of same as part of the annual practising renewal application process, HMRC should consider placing reliance on those processes and not requiring the agent to again certify that it complies with the PII requirement to be able to act as a tax agent.

HMRC would also need to consider what sanctions to impose where there is no PII; this could include limited access to HMRC’s systems or HMRC could limit contact with the agent until PII is put in place.

Unfortunately, it may be true that compulsory PII might not make any difference to the behaviour of rogue promoters. However, if compulsory PII was combined with Option A, this could mean forced tightening (and thereby raising) of standards and procedures. If rogue promoters continued to behave in the same way, the existence of compulsory PII would at least provide some protection for the consumer when things go wrong.

Option C: Improving transparency – helping consumers to make better choices

Firstly, we would not be supportive of an independent web-based rating service, not the least because of the potential reputational impact of a spurious/malicious review of an adviser but also due to the difficulty in judging if the review is fair and balanced without in depth investigation. This should be left to the regulatory function of the Professional Bodies where a taxpayer has a complaint about an unaffiliated agent or promoter.

However, we are supportive of other measures to help consumers make better choices. Simple actions should as a national media, social media and online campaign could be undertaken to educate consumers and help taxpayers make more informed choices when choosing a tax adviser/agent. Earlier we referred to our recommendation that the revised HMRC Charter makes the important role of agents more prominent. We continue to reiterate the importance of re-establishing HMRC’s GOV.UK pages which provide taxpayers with more information on choosing an accountant which contained further links to the various Professional Bodies own membership pages.

Several years ago this Institute undertook a very successful marketing campaign “Make sure your accountant is a Chartered Accountant”. We are not advocating that HMRC use the same slogan for any campaign it might undertake to educate consumers; however something which makes consumers check if their adviser is accredited or qualified in some respect could be effective in helping consumers make more informed choices, subject to any competition law requirements.

“Kitemarking” or another suitable quality mark could also be considered as a way of encouraging consumers to check if the adviser has some level of accreditation. This could be subject to certain conditions being met such as the quality mark being automatically available to advisers which are members of a Professional Body and hold a practising licence (and therefore also have PII), such as members of Chartered Accountants Ireland. This would at the very least encourage taxpayers wishing to appoint an adviser to check if that adviser has any accreditation. It might also encourage unaffiliated advisers to seek a professional qualification which would help raise standards.

Although this would involve an initial cost, this, combined with an effective education campaign, could be effective in establishing an important benchmark of quality in the market.

Option D: Penalties for Tax Advisers

We are not supportive of imposing further potential penalties on tax advisers. HMRC already has penalty provisions in various areas of UK tax legislation which can be levied on advisers. It is currently not clear to us if these penalties are being used effectively by HMRC. This consultation is concerned with raising standards in the tax advice market. However, penalties are, by their nature, retrospective and are imposed after the behaviour has already happened.

Sir Amyas Morse’s December 2019 loan charge review also very clearly set out the inefficacy of penalties where rogue promoters are concerned. There is therefore no compelling argument for introducing further potential penalties which can be imposed on agents when existing penalty regimes are ineffective as a deterrent to the behaviour being targeted and there is no clear evidence that HMRC are making effective use of these to begin with.

Option E: maximising the regulatory/supervisory role of current professional bodies

We can only comment on this in the context of the regulatory/supervisory function of the Professional Standards Department of Chartered Accountants Ireland. The proposal to introduce a legal requirement for anyone wanting to provide tax advice on a commercial basis to belong to a recognised professional body would undoubtedly raise standards. However, it could lead to “Institute shopping” where the unaffiliated agent is able to choose to join the Professional Body meeting the minimum criteria set out by HMRC.

This could also create a “shadow” adviser market by pushing the cost of using a qualified adviser up and sending some agents underground. Some taxpayers might also be tempted to complete their own returns at the expense of making errors which then results in penalties, interest and further HMRC admin costs in correcting these errors.

We would therefore suggest that option E is parked, and options A-C are considered first. Should HMRC then have continuing evidence that promoters and unaffiliated agents continue to present problems in the tax advice market, option E could then be revisited.

Option F: External regulation

We do not support option F; this would essentially penalise already qualified affiliated agents who are members of Professional Bodies and would impose an additional layer of regulation where one is not needed.

Any regulator would be also be part of the UK Government. It is the UK Government that sets tax policy which advisers then interpret and implement on behalf of their clients. Regulation by another Government body would be an inherent and unreconcilable conflict of interest in this market.

In addition, there would be a cost to external regulation. This would have to be recovered by agents most likely via the charging of higher fees. Again, this could have unintended and unpalatable consequences. Increased fees charged by advisers could result in more taxpayers doing their own tax returns as set out earlier. Again, this could also create a “shadow” adviser market with an overall increased risk of a higher tax gap.

The Irish experience

The Income Tax system

Ireland streamlined the income tax system in 2001 when income tax calculations moved to a full tax credit system in place of complex tax tables and table allowances. Common tax breaks for PAYE taxpayers are accessed by way of tax credits automatically allocated to the individual through the PAYE system and tax relief at source is applied on mortgage interest and on medical insurance premia.

Based on personal circumstances, the individual may be eligible for further tax credits which, on application, are allocated as credits via the PAYE system administered by employers. The PAYE sector represents the largest group of taxpayers in Ireland. The income tax system for the PAYE sector is accessible and straight forward to understand in terms of entitlements and claims, and the assistance of a tax agent consequently, is rarely required by PAYE workers.

The Irish Revenue has made a significant investment in information and communications technology over the past 20 years, leading to the introduction of electronic tax returns and tax payments across all tax heads via Revenue Online Service or ROS. A taxpayer can use electronic tax returns provided online or offline by Revenue to prepare and file tax returns. An online system called MyAccount is tailored to meet the needs of the PAYE sector and taxpayers with tax obligation or tax entitlement but with otherwise uncomplicated tax needs. MyAccount allows this cohort of taxpayers to manage their own tax affairs which results in little or no need for the assistance of tax agents. 2.6 million individual taxpayers were registered for myAccount at the end of 2019 out of a total PAYE taxpayer community of 2.99 million for that year.

Anti-tax avoidance system

Ireland addresses tax avoidance through:

• a long-standing statutory general anti-avoidance rule (GAAR) and extensive specific anti-avoidance legislation – this is now over 20 years old compared to its UK equivalent, the general anti-abuse rule, which is just seven years old;
• wide-ranging powers of investigation and audit available and exercised by the Irish Revenue;
• a mandatory disclosure regime for tax promoters;
• extensive network of information exchange arrangements with other jurisdictions; and
• punitive financial penalties for tax avoidance transactions.

Irish tax legislation does not distinguish between aggressive tax planning and tax avoidance. However, the Irish mandatory disclosure regime for certain transactions which give rise to a tax advantage (where the main or one of the main benefits expected from the transaction is a tax advantage) sets out transactions regarded as undesirable by the Irish Revenue.

A transaction is disclosable where:

• there is an intention to keep the scheme confidential from other promoters or from Revenue;
• a premium fee is charged based on the expected tax advantage;
• the arrangement is a standardised tax product that does not require tailoring to the client’s specific circumstances to any material extent;
• schemes that create a tax loss that can be used by more than one individual client and the main outcome of the transaction is the provision of tax losses or creates a loss-buying scheme for corporates;
• employment schemes that generate a tax advantage for an employer, employee, or any other person, with the exclusion of routine schemes already subject to Revenue oversight (e.g., share ownership trusts); and
• schemes that convert income into capital to avail of lower tax rates.

Routine tax advice and the routine use of exemptions and reliefs for bone fide purposes are not disclosable for these purposes.

Non-compliance with the GAAR triggers the application of penalties under Taxes Consolidation Act (TCA) 1997. For example, a 30 per cent surcharge is payable on the tax avoided in a tax avoidance transaction under Sections 811A and 811D TCA 1997, along with fines or imprisonment for the most serious tax offences.

By making a protective notification to Revenue of a disclosable transaction within 90 days of beginning a transaction, a taxpayer can qualify for interest or surcharge mitigation if the Revenue successfully challenges the transaction under the GAAR. Where serious tax evasion is suspected, criminal proceedings may be initiated against a taxpayer.

Since winning a landmark GAAR case in 2011, Revenue Commissioners v O’Flynn Construction & Ors [2011] I ESC 47 (Table 1, Scheme 4), Revenue pursues anti-avoidance cases through the courts and is generally successful. For example, in 2019, the Revenue settled 127 tax avoidance cases with a yield of approximately €29 million in tax, interest and penalties. At the end of 2019, the Revenue was actively challenging 469 cases involving potential tax avoidance relating to 27 transactions. Further information is set out in Revenue’s Annual Report for 2019.

In Ireland, Revenue has not pursued any form of additional regulation of the tax agent market in that jurisdiction over and above that already undertaken by the regulatory functions of the various Irish Professional Bodies, including this Institute. This has not been necessary as Revenue has several powers at its disposal to rigorously tackle avoidance behaviour by taxpayers and the promotion of avoidance schemes by agents.

In addition, Revenue also has power under section 815A(7) TCA 1997 to make referrals to Professional Bodies where it believes there to be a serious failure by an agent/tax practitioner to meet the Professional Standards of that body. The anti-avoidance powers in combination with the potential to report an agent to their Professional Body are both pursued rigorously by Revenue to the fullest extent possible.

Ireland also has criminal aiding and abetting legislation which means accountants can be liable to prosecution under Section 1078 TCA 1997. The Act states that a person is liable to conviction if the person “knowingly aids, abets, assists, incites or induces another person to make or deliver knowingly or wilfully any incorrect return, statement or accounts in connection with any tax”.

Conclusion

We look forward to engaging in further consultation in future on this matter. In the meantime, in the context of the foregoing, as a minimum we believe that the following four key points merit serious consideration:-

1. There should be no further regulation of qualified agents who are members of Professional Bodies with a strong, effective, and active regulatory function, such as members of Chartered Accountants Ireland;
2. Under option A, HMRC should target rogue promoters more effectively with the comprehensive powers which they already have available to them after a review has been conducted of the collective efficiency of their use by HMRC – we recommend this review is conducted by Sir Amyas Morse;
3. Further digitisation of the tax system should aim to remove administrative obstacles and unnecessary complexities for taxpayers but should be carried out in tandem with a defined roadmap for simplification of the UK tax system; and
4. The Office of Tax Simplification should be tasked with carrying out a review of income tax complexity in particular given the proposed extension of MTD to income tax from April 2023.

Freedom of Information

We note the scope of the Freedom of Information Act with regards to this submission. We have no difficulty with this response being published or disclosed in accordance with the access to information regimes. This response will be published on our own website in due course and will be available to all of our members and the general public.

Appendix 1 – submission to Steven Taylor, February 2019

Options for regulating the UK tax agent market – obtaining and retaining membership of Chartered Accountants Ireland

Introduction

I refer to your meeting with Brian Keegan, Director of Public Policy and Taxation, on 6 December 2018 to further discuss the ongoing project examining options for regulation of the tax profession in the UK.

As discussed during that meeting we are now setting out more information on the route to obtaining qualification as a Chartered Accountant with Chartered Accountants Ireland and how membership of this Institute is retained once an individual is admitted as a member.

As a dynamic organisation which is continuously trying to improve its education offering and reflect market conditions and requirements, these procedures are subject to constant review and change. In particular, as an all-Ireland body with a significant number of members in both the Irish and UK jurisdictions, it is possible that some revisions and adjustments will be made as a consequence of Brexit. The descriptions provided here are correct as of 4 February 2019.

About Chartered Accountants Ireland

As set out on the previous page, Chartered Accountants Ireland is a membership body representing over 27,000 influential members throughout the globe. 23% of our members are based in the UK including Northern Ireland3.

More details on our governance is set out at the links below.

• Council
• The President and Officer Group
• Management Team/Departments

Chartered Accountants Ireland also publishes annual reports.

Global recognition of the Chartered Accountants Ireland qualification

The ‘Chartered’ title is an internationally recognised professional designation that shows the highest standards of ethical, professional and technical expertise. The Irish Chartered Accountancy qualification granted by Chartered Accountants Ireland is fully recognised by the dominant accountancy body in the US (AICPA) and is one of the few finance and accountancy qualifications to have such valuable recognition.

The qualification is also recognised in Continental Europe and there are mutual recognition agreements with New Zealand, Canada, Hong Kong and South Africa. The qualification is also recognised in England, Wales and Scotland under a number of reciprocity agreements.

About Chartered Accountancy

Chartered Accountants are leading business professionals, recognised around the world as experts in accountancy, taxation, audit, finance and business leadership. Today’s Chartered Accountants are trusted business advisors who provide essential strategic guidance across all sectors and play a pivotal role in modern organisations.

Chartered Accountants work as managers, steering businesses in the right strategic direction, solving problems, and implementing change. They report on the financial performance of a company or firm, and advise on taxation which impacts greatly on the decision making process and are often trusted advisors providing services to other businesses either as consultants or as a practicing partner.

The current Secretary of State for Northern Ireland, Karen Bradley, is a Chartered Accountant who qualified with our sister Institute, the Institute of Chartered Accountants in England and Wales.

While practice is the work area with which Chartered Accountants are most associated in the public mind, just 25% of our members are working in practice with 64% of our members our working in business/industry4. This is a key consideration in the context of any regulatory or enforcement structures of this Institute. Just some of the areas Chartered Accountants can be found in are set out below.

Members in Business

Chartered Accountants work in a wide range of business sizes and sectors and in a broad spectrum of roles, from financial controllers and directors, to chief executives, senior management and Board members. Roles can include corporate leadership, taxation compliance and advisory, management accounting, business analysis and sales management.

Members of Chartered Accountants Ireland also pursue careers in financial services; advising on risk management, taxation issues, financial investment and the optimum use of assets.

Members in Practice

Chartered Accountants work in practice providing professional financial services to businesses. Auditing, taxation, accounting, financial analysis, risk management and advising on financial structures are just some of the wide-ranging services provided by Chartered Accountancy firms.

Public Sector

Chartered Accountants working in the public sector demonstrate strong commercial and decision-making skills as they help to safeguard the integrity of public spending. Ensuring tax payers receive value for money through efficient and effective resource allocation and monitoring is key in such roles.

Route to membership

Members of Chartered Accountants Ireland secure their qualification through a combination of professional exams and practical experience. The training routes available provide choice and flexibility to graduates, non-graduates, Accounting Technicians and experienced professionals.

The relevant starting point, or entry route, with this Institute is dependent on the individual’s prior educational qualifications.

Entry routes

There are six potential entry routes to training:-

1. College/university students

The most traditional route, to qualifying with Chartered Accountants Ireland, is to study after completing an undergraduate or Master’s degree. Accountancy firms and businesses hire graduates into training contracts from a range of academic backgrounds.

The relevant individual does not have to study accountancy, business or finance at university to gain entry to training, however if they do they may be eligible for exemptions meaning less exams. Non-relevant graduate entrants undertake three years of examinations with this Institute.

2. Those considering a career change

This route is open to someone is working in a finance or business role, or in another industry who is eager to progress their career and gain the confidence and skills to lead in business. Such individuals do not have to be working in a finance role to gain entry to training but can gain this experience at a later stage before sitting their final year exams.

3. Accounting Technicians Ireland members/students

Accounting Technicians Ireland (“ATI”) members and students can decide to continue their studies in order to advance their careers via training with Chartered Accountants Ireland. Chartered Accountants Ireland and ATI are partner organisations meaning the Institute recognises the skills gained while studying to become an Accounting Technician.

4. School leavers

School leavers can start training directly out of school via the direct entry school leaver pathway which offers an alternative to college/university. In their first year, individuals study with our partner body, ATI. In Northern Ireland students must have 3 GCE Advanced Level subjects at Grade C or better with GCSE Ordinary Level English and Mathematics at Grade B or better.

5. Members of another body

Chartered Accountants Ireland has reciprocity agreements with a number of other Institutes that allows members of other accountancy bodies apply to Chartered Accountants Ireland for membership.

If someone is a qualified member of another professional accountancy body, they may be eligible to join Chartered Accountants Ireland. The Institute has various routes to membership, including reciprocal agreements. Details of these were set out earlier.

Usually applicants to Chartered Accountants Ireland who are members of another body will have to undertake local company law and the relevant jurisdictional taxation exams before being allowed to become members.

6. International students

To study with Chartered Accountants Ireland, the individual must be a resident somewhere on the island of Ireland to attend classes and workshops. In order to qualify students must pass the relevant exams, complete the required work experience and must be eligible to work somewhere on the Island of Ireland.

Training routes

Once a prospective trainee meets the entry requirements for the relevant entry route, they are admitted onto the relevant Education course as a trainee. Training is then undertaken via a Training Contract between the student, their employer and this Institute, or via an alternative arrangement known as the Flexible Route. The training, experience and examination requirements are the same for both.

The Institute’s approach to training and education is unique; Chartered Accountants Ireland does not outsource its education provision to third party colleges. Everything is provided in-house – lecturers, courses, exams, course materials and support. The Institute has the best lecturers across the Island of Ireland, experts in their field, who deliver the best syllabus to the highest standards. Classes are available around the country with purpose built student centres in Dublin and Belfast.

Trainees of Chartered Accountants Ireland therefore receive a top class educational experience, have better interaction with their lecturers and their professional body and receive more support on the ground.

As set out earlier, there are essentially two training routes which trainees can undertake.

1. Training contract

The Training Contract route is a structured programme that combines working and training. Traditionally employers will hire recent college or university graduates. The contract typically lasts 3.5 years. During the period of the contract the Chartered exams are taken with this Institute and the relevant work experience is acquired in order to qualify.

Business graduates with a 2:2 honours degree or better can expect exemptions from the first year exams (known as CA Proficiency 1 or CAP1). Postgraduates from accredited Masters programmes may be exempt from all first and second year exams (known as CA Proficiency 2 or CAP2).

Businesses and firms who wish to offer training contracts must be approved as recognised training organisations by Chartered Accountants Ireland. A firm or business is eligible to become so if (and so long as):

• it is a Member Firm , or
• it is an Organisation (in business or the public sector) which has at least one member of the Institute engaged therein in such capacity as may be deemed suitable for training purposes by the Council and which otherwise satisfies the Institute in such manner as the Council may consider appropriate that it can and will provide an effective training environment for future members of the Institute.

2. Flexible route

The Flexible Route allows trainees to stay in their current job, study on their own terms and generate the relevant work experience now or further down the line. This route covers the same subjects and the same examinations as trainees in a training contract.

If someone is working in business, a graduate, a postgraduate, a school leaver or an ATI graduate, this route is an option. If that person has been working for less than four years, there is a stipulation that they must generate at least one year of relevant accountancy experience before sitting the Institute’s final exams, the Final Admitting Examination (known as FAE).

Examinations

There are three levels of Examinations with each level containing taxation.

• CAP1 – trainees study for and are examined in Taxation I, Financial Accounting, Finance, Management Accounting and Law for Accountants. Taxation I comprises Income Tax and VAT.
• CAP2 – trainees study for and are examined in Taxation II, Financial Reporting, Strategic Finance and Management Accounting and Audit and Assurance. Taxation II comprises Corporation Tax, Capital Gains Tax, Inheritance Tax, Stamp Taxes and VAT on property.
• FAE – trainees study for and are examined in Corporate and Individual Tax Planning, Audit and Assurance, Business Leadership, Financial Accounting and Reporting and Strategic Finance and Management Accounting.

At each level, trainees are assessed via a combination of traditional examinations and formal in-year assessments. At CAP1 and 2 level examination candidates must obtain a minimum of 50% of the marks available in the relevant subject with a pass in each subject required to pass the relevant year and move on to the next.

At FAE level examination candidates must obtain a minimum of 50% of the marks available in both FAE Core and FAE Elective (see more later) to pass the FAE. This is via a combination of technical marks and marks for Professional Competence.

At FAE level trainees must choose an Elective subject to study and be examined in from a choice of five, one of which is Advanced Taxation. Advanced Taxation (Northern Ireland) teaches and examines the more specialist elements of UK taxation including international tax issues, HMRC enquiries, investigations and powers, capital taxes planning, the taxation of trusts, significant recent developments in taxation (e.g. the corporate interest restriction), more complex areas of VAT and integration of taxes.

Cumulative principle

The cumulative principle is an important inherent principle as trainees move from one examination level to the next. From CAP2 level, each course has cumulative subject material, i.e. material examinable at previous levels is potentially examinable at the next level. Cumulative material is included at FAE in an integrated manner (see later for more on “Integrates” level). At FAE level trainees are expected to be fully conversant with material covered at previous levels. Trainees are expected to be able to draw from previous learning and apply it appropriately to relevant business scenarios as presented at the FAE.

Trainees who have obtained exemptions from either CAP1 or CAP2 are equally subject to the cumulative principle as the awarding of an exemption carries the explicit assumption that they have covered the material from prior levels and are at an appropriate standard.

The Competency Statement at each examination level is also updated on an annual basis. For taxation at each examination level this takes into consideration the most recent Finance Act and other relevant taxation legislation and developments.

CA Diary

As set out earlier, trainees secure their qualification through a combination of professional exams and practical experience. Trainees training under the training route and the flexible route are each required to record their practical experience via the CA Diary.

The CA Diary records in a systematic and structured way relevant work experience (including training) and allows trainees to reflect on their role in their work activities/assignments and how they have developed their skills, knowledge and competencies. It also allows trainees to reflect on their experience, assess/track progress and identify any areas for future development.

Diary entries must be approved at least twice a year by their mentor and any mentor reviews form the trainee’s log of experience. The regular review and approval of experience (by this suitably qualified mentor) also forms part of the Institute’s regulatory requirements and is an essential eligibility criterion for admission to associate membership of the Institute.

Trainees must demonstrate the acquisition of mandatory skills and competencies, to a level of “Integrates”, in:

• Core Professional Values/Personal and Interpersonal Skills; and
• The Business Environment range of competencies.

“Integrates” level requires the trainee to demonstrate the following skills:-

• Identifies problems and resolves them.
• Demonstrates an in-depth technical knowledge in defined areas.
• Demonstrates clear managerial/leadership skills.
• Demonstrates ability to manage an assignment/project to completion.
• Generates ideas and is proactive in implementing.
• Communicates concisely and effectively, verbally and in writing, both in-house and to clients.

As technical accounting and financial expertise remain at the heart of the development of the Chartered Accountant, trainees are required to demonstrate competency in functional areas of accountancy work, including taxation. Trainees whose main area of professional development is in taxation must demonstrate the acquisition of all of the competencies in this range5.

CA Diary entries are regularly reviewed by the Institute’s Training Support Unit. The Unit also regularly carries out visits to recognised training organisations and meets with trainees, their mentors and Training Principals.

Admission to membership

The route to qualification ending with admission to membership is therefore comprised of three elements:

• academic study delivered through a third level college or equivalent or through study for and successful completion of the examinations of ATI for admission to a training route;
• a period of Approved Training under either the training contract or flexible route; and
• a period of professional education and assessment (including the passing of all prescribed exams) set by Chartered Accountants Ireland.

Before attending a conferring ceremony, which formally admits the trainee to associate membership of Chartered Accountants Ireland, all of the above criteria must be satisfied. In addition, the trainee’s CA Diary final training review must be completed which must also be signed off by their Training Partner/Training Principal.

When a trainee is eligible to join as an associate member, they receive a notification from the Institute inviting them to apply for membership. Those trainees who meet the application criteria are admitted via a conferring ceremony after formal application and payment of the appropriate fee. The process of admission to membership is thorough and is undertaken by a separate department within the Institute, Members Services.

Membership

Once an individual has been admitted to membership they are required to continually fulfil various criteria in respect of continuing professional development, regulatory requirements and professional conduct including meeting the conditions laid out in various bye-laws and regulations.

In addition all members are required to comply with the Code of Ethics and in particular, with paragraph 100.5, compliance with the fundamental principles. Therefore, members of Chartered Accountants Ireland are required to observe high standards of conduct and play their part in re-enforcing public belief in their professional integrity. The Code of Ethics assists members by providing a framework within which they can make ethical decisions.

Continuing Professional Development (“CPD”) requirements and monitoring

All members (unless they meet certain exemption or waiver criteria) are required to undertake CPD. Members are provided with guidance to assist them in understanding their CPD requirements.

For members of Chartered Accountants Ireland, the process of life-long learning begins early, starting with the Institute’s comprehensive education, training and examination programme which leads to qualifying for admission as a Chartered Accountant.

CPD enables Chartered Accountants to continue this process and develop and maintain the capabilities necessary to allow them to provide the highest quality of service within their professional environment. The Institute’s Life Long Learning department develops and delivers relevant CPD specialist courses for members to assist them in meeting their annual CPD requirements.

CPD can be achieved by at least three different approaches:

• The input-based approach which allows a member to establish a set amount of learning activity that is considered appropriate to develop and maintain competence (“the Input-based Approach”); or
• The output-based approach which requires a member to demonstrate, by way of outcomes, that he develops and maintains professional competence (“the Output-based Approach”); or
• The combination approach which requires a member to combine elements of the Input-based Approach and the Output–based Approach setting the amount of learning activity required and measuring the outcomes achieved (the “Combination Approach”).

The approach most commonly used and familiar to most members is the Input-based approach. All members who adopt the Input-based Approach are required to achieve a minimum of 70 hours of CPD per annum to sustain their professional competence. Of those 70 hours, a minimum of 20 hours must be structured CPD and up to 50 hours may be unstructured.

Members in practice or members employed in practice who operate the Input-based Approach are expected to achieve a minimum of 10 hours structured CPD per annum in each service area in which they practice:

• Audit / Accounting
• Investment Business
• Insolvency Practice
• Tax

Annual returns

To evidence compliance with the Institute’s Bye-laws, CPD requirements, regulations and Code of Ethics, members are required to complete an Individual Annual Return which must be submitted by 31 October in the relevant year. Individual annual returns submitted by members are then scrutinised by the Professional Standards department and a number of returns are selected each year for further review.

All member firms, unless they are regulated by ICAS or ICAEW, are also required to complete an Annual Return as part of the Institute’s Professional Standards Department’s Quality Review process. Once submitted, the Firm’s Annual Return (“FAR”) is then risked to assess the firm’s compliance with the regulations. This is done by way of a ‘Desk Top Review’ which can lead to further follow up correspondence or in certain circumstances, a monitoring visit.

The FAR is issued to firms with an ‘as at date’ set to correspond with the month in which their professional Indemnity insurance expires and is required to be submitted within two months of that date. This ensures that the Institute receives the most up to date information possible regarding the firm’s professional indemnity insurance.

Regulatory function

The Professional Standards Department of Chartered Accountants Ireland, along with the relevant compliance and disciplinary committees, is responsible for the delivery of the Institute’s regulatory and disciplinary obligations which derive both from statute and its own Bye-Laws and Regulations.

The key functions of Professional Standards include:

• Professional authorisations;
• Professional Conduct; and
• Quality Assurance.

Key committees involved in these processes include the Quality Assurance Committee, the Insolvency Licensing Committee, and the Conduct Committee. The Institute’s Regulatory Policy Board is responsible for developing Institute policy with regard to regulatory matters and also for approval of various Institute Regulations.

An independent Board, the Chartered Accountants Regulatory Board (“CARB”), oversees and supervises how the Institute fulfils its regulatory and disciplinary remit, with particular emphasis on impartiality, farness, rigour and integrity. CARB reports annually on its role to Council and to wider stakeholders.

Quality assurance

Quality Assurance is the means by which the CARB ensures professional services provided by members and member firms are of the highest possible standard by monitoring compliance with the Standards of Professional Conduct through a system of returns and inspections and taking regulatory action when necessary.

All members who hold a Practising Certificate and their firms are included within the Board’s programme of Quality Review which is the term used to describe the programme by which the Board assures itself as the quality of services provided by PC holders and their firms.

The Quality Review regime includes:

• A Monitoring Visit; and
• The assessment of a Firm’s Annual Return – submitted by all firms

All member firms are included within the scope of the Public Practice Regulations and may be selected for a Monitoring visit. The cycle for these visits varies depending on the nature of the activities provided by the firm and based on the assessment of the Annual Return they have submitted. The Monitoring visit can cover all the professional activities of the firm including accounting, auditing, taxation investment business advice, consultancy etc.

One of the most important objectives of the visit is to determine the extent of the firm’s compliance with the standards of professional conduct, to identify any weaknesses and agree with the firm any remedial action to improve the compliance within the firm.

Complaints and disciplinary processes

Chartered Accountants Ireland examines all written complaints against members, member firms, students and affiliates of Chartered Accountants Ireland and will commence proceedings in relation to disciplinary matters where relevant. Anyone can make a complaint, for example, clients, other accountants, regulators, oversight bodies, members of the public, HMRC and internal committees. The Institute publishes guidance on its disciplinary process and how to make a complaint.

The primary purpose of the disciplinary process is to provide a just and effective system of investigation, decision-making and sanctioning in order to:

• bring to account members who fail to maintain appropriate professional standards;
• deter misconduct and poor professional performance thereby promoting adherence to the high professional standards expected of members of Chartered Accountants Ireland;
• ensure that those who use professional services provided by members of Chartered Accountants Ireland are protected;
• protect the public interest generally;
• maintain public confidence in the Institute, its members and in the regulated profession of accountancy; and
• maintain Member confidence.

The Institute will instigate disciplinary proceedings in relation to matters which appear to give rise to liability to disciplinary action; these are referred to as “disciplinary matters”. Each complaint or potential disciplinary matter arising will be assessed to determine whether it is a disciplinary matter. Disciplinary matters will then be investigated or resolved through conciliation, settlement or the standard disciplinary process. A more detailed explanation of this process is included in the Appendix to the detailed guidance. The flow chart on here of this guidance also sets out this process in an easily understandable format.

Chartered Accountants Ireland is currently in the process of arriving at a mutually acceptable Memorandum of Understanding (“MOU”) between this Institute and HMRC which will be used to shape future instances where HMRC officers perceive that a member of this Institute has failed to meet the relevant professional standards.

Brian Keegan and Leontia Doran, UK Taxation specialist, in conjunction with colleagues from the Institute’s Professional Standards department, have been in discussions with your HMRC colleagues Michael Miller, Nigel Robinson and Samuel Higley, in recent months, to arrive at a mutually acceptable MOU. It is expected that this process should reach its conclusion by Spring 2019.

Conclusion

The aforementioned information sets out how membership of Chartered Accountants Ireland is both obtained and retained once an individual has been admitted to membership. The Institute’s rigorous process for both obtaining and retaining membership means our members meet the highest possible quality and conduct standards in the performance of their work.

Where members fall short of those standards, the Institute’s complaints and disciplinary process is designed to investigate and enforce the high standards expected of all members of Chartered Accountants Ireland.

Freedom of Information

We note the scope of the Freedom of Information Act with regards to this submission. We have no difficulty with this response being published or disclosed in accordance with the access to information regimes. This response will be published on our own website in due course and will be available to all of our members and the general public.

1 Issue Briefing: marriage allowance, HMRC, February 2015

2 Estimated costs of tax reliefs, HMRC, October 2019

3 Chartered Accountants Ireland Annual Report 2017

4 Chartered Accountants Ireland Annual Report 2017

5 Chartered Accountants Ireland Training Support Unit, December 2018, here – Professional Development Requirements https://www.charteredaccountants.ie/docs/default-source/ca-diary-training-support-forms-info/20181205_professional-development-requirements-_v2-0.pdf?sfvrsn=4