Latest Government consultation grapples with how to regulate tax advisers

by | Mar 14, 2024

TaxWatch notes with interest the launch of a Government consultation to strengthen regulations in the tax advice sector, with an alarming 25% of tax liabilities being non-compliant for businesses within self-assessment. Given the 30-month hiatus since the outcome of the prior consultation ‘Raising standards in the tax advice market’ the proposals under consideration are much more ambitious than the previous consideration of mandating Professional Indemnity Insurance (PII) for registered tax agents.

The new consultation raises the possibility of establishing minimum standards, improving monitoring and effective enforcement action and better routes for customer support after a 3-5 year transition period to one of the following options:

  • mandatory membership of a recognised professional body who are responsible for monitoring and enforcing standards of their members
  • joint HMRC – Industry enforcement (the hybrid model) to monitor and raise standards of the market
  • regulation by a new arms length government body that sets, monitors, enforces and raises standards in the market

Building on our existing work into the regulatory performance of the professional bodies who are signatories to the Professional Conduct in Relation to Taxation (PCRT) voluntary framework, TaxWatch plan to contribute to the consultation. We will be advocating for an outcome that is targeted to the most harmful practices to bolster ensure public trust in the tax regime to collect the monies due and minimise the scope for low professional standards and consumer exploitation.

Whilst the consultation wording expresses a preference for option 1, the document acknowledges trade-offs and drawbacks within the options and also grapples with the scope of the new regime for advisers who aren’t in direct contact with HMRC systems. It specifically excludes umbrella companies, and leaves for future determination how it would apply to promoters of tax avoidance schemes, a major source of the majority of the harm in TaxWatch’s view.

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