Mark McLaughlin highlights the importance for taxpayers of choosing a reputable tax adviser.
To misquote Forrest Gump: "Tax advisers are like a box of chocolates. You never know what you're gonna get!" Like many occupations, there are good tax advisers and bad ones.
It has been reported that around 65% of individuals and firms who undertake tax work are not members of any professional body. The other 35%, who are members of professional bodies, are subject to regulation by those bodies, underpinned by disciplinary procedures for non-compliance or poor performance.
HMRC’s standard for agents
HMRC’s document ‘HMRC: the standard for agents’ (tinyurl.com/HMRC-TSA) sets out the minimum standards expected of agents and tax advisers. HMRC expects all agents (i.e., whether regulated by a professional body or not) to meet its standard. HMRC’s standards for those advising on tax planning are:
- Lawful behaviour;
- Disclosure and transparency;
- Not to create, encourage or promote tax planning which sets out to achieve results contrary to the clear intention of Parliament in enacting relevant legislation, or which are highly artificial or highly contrived and seek to exploit shortcomings in the relevant legislation; and
-
Professional judgement and appropriate documentation.
HMRC monitors tax and collects evidence of poor agent behaviour. If the adviser’s behaviour falls below expected standards, HMRC will consider acting against the adviser. HMRC has a range of powers and practices to deal with breaches of the standards.
The ‘naughty step’!
HMRC has also produced guidance (‘How HMRC works with agents’), which sets out HMRC’s approach to working with tax agents and advisers (tinyurl.com/HMRC-HAWA). HMRC warns that if an adviser does not meet the standard for agents, action will be taken against the agent.
HMRC’s approaches for addressing poor agents’ (including tax advisers’) behaviour are contained in ‘Raising standards in the tax advice market – HMRC’s review of powers to uphold its standards for agents’ (tinyurl.com/HMRC-RPUSA). The main HMRC policies and statutory powers are:
(a) Suspending agent codes to limit access to self-assessment and corporation tax functions.
(b) HMRC can adopt a ‘refusal to deal with’ approach to advisers (i.e., in extreme and exceptional circumstances of poor agent behaviour).
(c) Certain statutory powers are potentially available for HMRC, including:
- HMRC has the power to issue conduct notices and financial penalties of up to £50,000 to tax agents who have acted dishonestly in their dealings with HMRC;
- HMRC can make a disclosure of conduct to the tax agent’s professional body (if there is one);
- Penalties for errors in tax returns and other documents, where an error in the taxpayer’s document is attributable to another person;
- The ‘enablers’ legislation allows HMRC to impose financial penalties on those who have enabled tax avoidance where abusive tax arrangements have been defeated; and
- In the most extreme cases, HMRC may carry out criminal investigations into tax agents that have potentially committed offences such as tax fraud.
Practical tip
Taxpayers should choose tax advisers very carefully. Despite all its powers, HMRC is seeking to become more involved in regulating tax advisers and has been engaging with the tax profession to agree a single common standard for all agents irrespective of whether the agent is a member of a professional body (although the standards will be particularly relevant to unqualified and unregulated tax advisers). However, the single common standard has not been achieved at the time of writing.
