ICAS responds to tax regulation consultation
By Susan Cattell, Head of Tax Technical Policy
29 May 2024
ICAS has responded to an important HMRC consultation on strengthening the tax regulatory framework, which set out three possible models for regulation.
HMRC published the consultation ‘Raising standards in the tax advice market – strengthening the regulatory framework and improving registration’ in March. This was the latest in a series of consultations since 2020 on improving standards in the tax profession, following the recommendations made by the Independent Loan Charge Review.
It explored approaches to strengthening the controls on access to HMRC’s services for tax practitioners. It also outlined three potential regulatory models: Mandatory membership of a recognised professional body, joint HMRC–industry enforcement and regulation by a separate statutory government body.
ICAS response
We were pleased to see the government recognise in the consultation that the majority of tax advisers are competent and adhere to high professional standards. There is also recognition that many taxpayers rely on tax practitioners to provide quality advice and services, helping them pay the right tax at the right time and access the tax reliefs they are entitled to.
We accept that there is a minority of incompetent, unprofessional and unscrupulous advisers whose activities harm clients, reduce public revenue and undermine the tax advice market. We have no evidence to suggest that there are widespread concerns about the quality of tax practitioners licensed by ICAS (by reference to the lack of referrals from HMRC under the Memorandum of Understanding and the comparatively small number of regulatory and disciplinary orders applied by ICAS over the years). However, we recognise the need for government action to mitigate the risks to the public interest and have been calling for action for some time.
ICAS supports the first option for regulation, mandatory professional body membership for all tax agents. This would remove the uneven playing field for agents, provide a better level of protection for clients and increase confidence in the UK tax regime. In contrast to the other options, it could also be achieved in a proportionate and cost-effective way, allowing HMRC to focus its resources on its core role of running the tax system.
It is our view that ICAS currently operates a sufficiently robust and effective supervision regime for tax practitioners, so we would have reservations about any proposals to significantly change the way professional bodies operate. However, while we are confident in the generally high standards of ICAS members providing tax services, we accept that improvements can always be made. For example, better cooperation with HMRC and other professional bodies to ensure effective sharing of intelligence and promotion of best practice.
Other points raised in our response included:
Mandatory registration with HMRC for tax practitioners
We agree that any agent interacting with HMRC should have to register with HMRC because HMRC needs to know who it is dealing with and be able to track poor behaviour across different cases handled by an agent.
Scope of the requirement to belong to a professional body
We don’t agree that the requirement to belong to a professional body should only apply to those who interact with HMRC. This might make the system easier to implement, but it could reduce the effectiveness of the regime and wouldn’t address the concerns that have been identified. It could also offer opportunities to bypass regulation, as bad actors might undertake work but ask their clients (or another agent) to submit on their behalf.
The consultation also asks whether the requirement should only apply to controllers or principals of firms. We believe careful thought should be given to the most effective and proportionate approach.
If the regulatory model is to reflect the models already operated by the professional bodies, then it might make sense to have the regime based on principals, which is the basis of the bodies’ practising certificate regime (with no concerns identified over its effectiveness).
However, consideration should be given to how best to ensure that the ‘controlling minds’ of a business are adequately covered. There is evidence in some other areas of regulation, for example, insolvency, that bad practices can be maintained by providing individuals as ‘regulatory fronts’, with the real power being exercised by people behind the scenes.
Should other regulated professions be excluded from the requirement?
The consultation proposes that groups of tax practitioners already subject to robust regulation would be excluded from the requirements. Examples given include those providing legal services, licensed conveyancers and independent financial advisers.
We don’t support this proposal because it wouldn’t produce a level playing field for all agents. Excluding parts of the tax adviser population would undermine any benefits from creating a new regime, supported by a clear justifying rationale. In our view, any professional body that wanted to be a regulator for tax purposes should be required to meet the published eligibility criteria for tax regulatory bodies that will need to be put in place, as part of the implementation of the new regime.
Let us know your views
ICAS responds to many tax calls for evidence and consultations, as well as producing tax policy papers and reports. We also regularly attend meetings with HMRC at which service levels, delays and other issues are discussed, and we raise problems being encountered by members. We welcome input from members to inform our work; email tax@icas.com to share your insights and feedback.
