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Rebecca Benneyworth Training Consultants
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Please register your response to Working with Agents here

Our discussion about HMRC powers to deal with agents who fall below standards has generated lots of debate. Last week, draft legislation was issued.

We've put together some user friendly summaries in our "Road Map" article, where you'll find links to more detailed articles plus how to send your email responses.

We'd also like to get your views about the proposed legislation here on this Any Answers thread. If we get 100 or more responses, we'll do a prize draw where one of you can win a bottle of champagne. We'll put two bottles up for grabs if we get over 200 responses.

We will draw the winner(s) after the consultation closes on 3 March and will contact you, so that your anonymity is protected should you choose. Once you have responded, tell your colleagues about this.

Please log a response on here when you respond - any "Anons" please could you add an identifying mark or some way to contact you if you want to go into the draw - or maybe it is time to get that user name changed!

Get responding!

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By Anonymous
15th Feb 2010 11:35

This is not the way to go

I am very concrened about this. It exposes accountants to unwarranted action from HMRC. It is just not practical. It has not been thought through. It is unworkable.

Aziz

http://www.southsideaccountants.co.uk/index.html

 

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By Anonymous
15th Feb 2010 11:45

Seriously concerning

The Condoc is full of encouragement on how important agents are but that HMRC do need to deal with the seriously bad ones.  

By sharp contrast, the draft legislation is lacking in every respect - poorly targeted, weak definitions, inadequate safeguards, strange penalty regime, pretty unworkable - and exposed to comment while the consulation is still in progress and with less than a month allowed for comment. If enacted as it stands, it would be nightmare world in which to give any form of tax advice.

Our firm will be making representations to both ICAEW and CIOT.

It is ironic that legislation aimed at agents who fall below standard is itself well below standard

Tom

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15th Feb 2010 12:34

Get Real

This proposed legislation deals with deliberate wrongdoing by agents. It extends the existing powers in respect of direct tax to all taxes.

I do not want the profession to defend deliberate wrongdoing. Crooks can only  give the profession a bad name and potentially take good business from honest competent agents..

We should all want to raise standards not  to tip a wink to the getaway driver.

Has anyone got any legitimate complaints regarding the existing regime regarding direct taxes?

Further the proposal to publish names of offenders seems perfectly reasonable your name will be liable to be published if you are caught speeding or travelling on a train with no ticket so why not for this conduct, deliberate wrongdoing is after all a form of theft.

 

 

 

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By Anonymous
15th Feb 2010 13:07

The reality might not be what you think, I hope it's not what we

SilverFoxPeter, please could you say whether you have read the draft legislation in detail and compared it to the Condoc? If so, I'd like to know any more thoughts you have, as you obviously disagree with ours!

The Condoc is something we would welcome, albeit with caution. The draft legislation is a different beast altogether. In practice, useful comments in the Condoc are of nought if the legislation says something completely different.

We are all for targeting and removing those who (try to) defraud the system.  But there are serious concerns that the draft legislation is so widely written that it can be too easily used against anyone, with devasting effect, e.g. ALL records for ALL your clients could go to HMRC + minimum penalty £5k + potentially ejected by your institute by default if prosecuted under these rules + quite possibly "named & shamed".  These may be suitable penalties for those engaged in fraud, but should they be anywhere near something that could be a simple but legitimate disagreement with HMRC?

If our fears are unfounded, no one would be happier - but experience has shown that poorly drafted legislation can lead to quite different things from those sought by the often good intentions behind it.

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By Anonymous
15th Feb 2010 13:33

Accountants

Please read the consultation - it really will change things for the worst. Please express your views either way.

Aziz

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15th Feb 2010 13:38

Drafting error

Al lot of the focus to date seems to be on the interaction of  clause 3(1) - defining deliberate wrongdoing and clause 3(4) which defines a loss of tax (more broadly than seems wise).
However clause 3(6) does contain an important caveat intended to limit the impact to naughty activities.
The real problem (besides the evident rush and consequential poor drafting generally) is that 3(6) applies "in particular to" naughty acts  when it should say it will apply "only to" to naughty acts.

Mark Lee

www.TaxAdviceNetwork.co.uk

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15th Feb 2010 15:27

Wrongdoing

 

I note Mark Lee's comment regarding the reference to "in particular” in paragraph 3 (6) this perhaps requires clarification or amendment.

Nonetheless we should not ignore that the proposed legislation does provide protection for practitioners.

First there must be wrongdoing. Secondly it must be deliberate. Even if those tests are passed before a tax agent notice can be issued there must be consent from the Tribunal. The agent has the opportunity to make their representations to HMRC and the Tribunal must be given a a summary of any representations made.

If the agent has been involved in deliberate wrongdoing it is hardly surprising that HMRC will want to investigate how far the contagion has spread.

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15th Feb 2010 15:40

Can taxpayers get away with more by representing them selves?

Ignorance is bliss. A self-employed person with no complications can fill in a tax return quite easily and claim for items they feel are justified. All expenditure caused by doing their income creation activity. I know of a woman who feels justified in treating as an expense hair colouring, hair do's and business suits because she feels she has to look smart at conferences etc. The AIA is very useful for the tax payer who does not understand capital allowances and feels the total cost of the equipment is an expense in one shot. An unrepresented tax payer only needs to get an adding machine with an add-list to total up the bills and if Vat registered this is OK if on the flat rate scheme. There is a trend developing here. No talk about deliberate wrong doing by the tax payer. I think there is a new service we can offer and that is help with completing you own tax return. The only faulty advice I have given here to a tax payer is if his profit dips under his personal allowance he should have restricted his AIA claim. But then we are making complications. May be the government can allow self-employed unrepresented tax payers to carry forward unused personal allowances? Lets do away with the agents.

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By Anonymous
15th Feb 2010 17:44

A liccence to print money?

Clause 2 of Sch 1 of the draft bill is so widely drawn that the man in the pub (who may know nothing at all about tax) who advises what you should do in connection with tax is your tax agent (you may have others).

If he advises you to do something that is capable of bringing about a loss of tax he can (under part 3 clause 25) be liable to a penalty of the greater of 100% of the potential lost revenue or £5000.

How many of us have not heard someone in a pub tell us how to avoid - or even evade - tax?

Ah yes! they will say but we won't use the legislation in that way.

Every effort should be made - contact your MP - to get this ludicrously wide legislation amended so that it deals with, but only with, real offenders.

 

 

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15th Feb 2010 19:29

BEYOND REASONABLE DOUBT ?

This is an appalling piece of legislation which is drafted in terms which could criminalise anyone for any innocent comment or error.

The interesting point is the absence of basic protection to the agent.  Everyone is innocent until PROVEN guilty, but this legislation allows for draconian penalties based upon little more than suspicion. Where in this proposed legislation does it give the agent a right to put HMRC's allegations to the terst in a court and make them PROVE BEYOND REASONABLE DOUBT ?

It also seems they can demand disclosure of documents, BUT, as a basis of our law anyone accused of an offence is entitled not to discose anything which he may wish to use in his defence except as required by the court under disclosure rules, and certainly there is no obligation for the accused to actively assist the prosecution in building a case against them.

This proposed legislation is perverse and breaches the very basis of our legal system, and breaches several sections of the HRA.  It must be defeated as it truly is another step towards a police state.

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16th Feb 2010 10:35

Out of business

I agree that dishonest or incompetent accountants/advisors should be punished, but this legislation will punish the innocent, too.

If this legislation goes through, and is abused by HMRC or its officers, then we will all be out of business.

The tax law is complex and changes are not always well publicised.

HMRC guidance is often incorrect, would this be taken into consideration? Not going by past events!

How can we possibly check every piece of information, and make sufficent profit to stay in business?

Can a client put us out of business by saying we 'gave incorrect advice'?

The onus seems to be upon us to prove our innocence, not upon HMRC to prove our guilt!

I am honest, and always try to keep up to date with new legislation. I try to give good advice, but can anyone guarantee that they have 100% accurate information from the client to base that advice upon, and can be 100% certain that the HMRC guidance they are following is correct? We can all do our best, but to have to record every single piece of data, etc, in case we have to defend ourselves later would make this profession a potential mine field, and one not worth continuing.

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16th Feb 2010 10:50

HMRC Powers working with agents

In general I agree with the need for policing agents but as a member of Chartered Accountants Ireland I feel that there is already effective control. Having worked in tax for quite a few years I have to say that the majority of agents I have dealt with do a good job but there is a minority out there that play by their own rules. In doing so they make the rest of us appear 'over do' our work and in turn do be 'too expensive'. In some cases accounts were never prepared and estimates were consistently filed. By the time the client decides to move to another accountant they are substantially in arrears, not to mention having a string of penalties and surcharges in place. Then they have to suffer the cost of being brought up to date.

Why does HMRC not operate the scheme as with Money Laundering controls in that they oversee agents who are not affiliated to any professional body?

 

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16th Feb 2010 11:24

Burden of proof

I do think that the whole issue boils down to the burden of proof, as CD says.

In seeking a tax agent notice, HMRC must assure the tribunal that deliberate wrongdoing has occurred. (Para 10(2)(b)). For this reason the hearings are normally open to the agent to come and represent himself. However, I do think more in the way of safeguards regarding the burden and quailty of proof are needed here - we all know of miscarriages of justice in the criminal law where the burden and weight of proof is very high indeed. We need to ensure that as far as possible agents are not subject to this process if HMRC has not made the case of deliberate wrongdoing.

If they have delberately facilitated tax fraud then in my view these proposals are a measured response.

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16th Feb 2010 23:09

Big Mack

The draft legislation is extremely widely drawn.  I can understand that they want to cover anyone who is advocating or assisting in fraud or tax evasion but I believe they have cast their net too wide. 

Definition of tax agent (Sch 1 Para 2)

This applies to anyone assisting another person with that person's tax affairs.  The person receiving the assistance is described as a "client".  Assistance includes advising a client in relation to tax and the assistance may be given free of charge and does not have to be given in the course of business.  Thus it appears that where any two people discuss tax and one person makes a statement that might be regarded as assistance, then the person giving the assistance is a "tax agent" within the scope of the legislation and the person receiving the assistance is a "client".  This could apply to a husband and wife, or two people having a conversation in a pub.  It would also apply to any employee of HMRC who gives advice to a taxpayer in the course of their employment – presumably HMRC would agree that it is part of their duty to assist taxpayers with their tax affairs.  So widely drawn is this definition that it could catch someone who merely provides the telephone number of the local tax office. 

Deliberate Wrongdoing (Para 3)

However the really shocking part of the draft legislation is the definition of "deliberate wrongdoing".  This applies where a tax agent (who can be anyone who expresses an opinion on tax) "does an act" that is capable of bringing about a loss of tax.  Presumably "does an act" includes making an oral statement.  "Loss of tax" means a loss of revenue (presumably to the Treasury) from tax.  Note that there is no distinction here between a loss arising from, for example, deliberately understating income and a loss arising from legitimate tax planning, or claiming a relief to which the taxpayer is entitled.  Thus if I advise my wife to open an ISA rather than an ordinary bank account, this may result in a loss of revenue and therefore I am guilty of deliberate wrongdoing.  If an officer in a tax office advises a taxpayer that they are entitled to claim tax credits, then this may lead to a loss of tax and the officer will be guilty of deliberate wrongdoing.  An earlier post points out that the term applies in particular to acts in respect of which a penalty could have been imposed but it is not restricted to such acts.  This is a ludicrous definition that completely distorts the ordinary meaning of the word "wrongdoing". 

 

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By Anonymous
16th Feb 2010 23:53

What about cleint misleading agents

My concern is where client mislead agents and then blaming their wrong doing on the advise given/collusion. Agents will have have to waste their time proving their innoncence. HMRC will have targets and will want results. Inspectors are likely to go for parties who appear to be easy target (result).

Very high risk of the professional body striking off the agent.

This is a real minefield.

This area should be left alone. They may be the minority of agents who are not a credit to the profession. It does not jusify this ill thought out change.

 

 

 

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17th Feb 2010 17:21

Overboard

Again HMRC have gone overboard to try and convince people that there are millions of wrong doers out there.

Tax Evasion/Tax avoidance is a classic example. Ask any Accountant who has been in practice for over 30 years what percentage of tax payers  and Accountants are fraudulent. You will be surprised at the minimilisk answer.

HMRC have enough powers to convict fraudulent Tax payers and Accountants. Customs and Excise can literally close any business "overnight" I've seen Inland Revenue clear out an Accountants' office (Accountant got 7 years, carried on business from prison and is still in business today through an itermediary). So how are the new powers going to alter that scenario? They won't.

What are we left with? A money generating exercise, with HMRC allowed to say we don't like this and threaten our livelyhood if we disagree. Fixed and Tax geared penalties abound!

The real worrying situation is that although we can make representaion to HMRC we cannot make representaion to Tribunal, thus taking away our liberty.

Rebecca, I hope its Crystal and not some cheap old Moet.

 

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17th Feb 2010 18:26

I think you all know my feelings about this.

I believe that agents who are involved in fraud should be prosecuted, however, they should be given access to a fair trial. A new system of civil penalties removes that right.

Here is the Human Rights Angle:

Article 6: the right to a fair trial
This applies to criminal proceedings. HMRC downplays the offence of agent fraud by creating a new civil offence of deliberate wrongdoing. This ensures that the agent no longer has the presumption of innocence or the right to a fair trial. HMRC is proposing that when it accuses an agent of deliberate wrongdoing (fraud to you and me) the hearing is ex-parte (the agent is not able to hear the allegation or conduct his defence).

Article 10: the right of freedom of expression
HMRC proposes that anyone who directly or indirectly assists another person with their tax affairs will be treated as a tax agent and penalised, if it is discovered that anyone reduced their tax bill as a result of the advice. Giving "assistance" can take the form of any advice, paid or unpaid. This means that the proposed legislation may censor anyone discussing any form of tax planning in public and using any media. The definition also applies to voluntary organisations, broadcasters and presumably to HMRC’s officers and employees, past and present.

Protocol 1, Article 1: the right of Protection of Property
HMRC's penalty proposals do not have reasonable relationship of proportionality between the means employed and the aims pursued. Proposed levels of fines are set, but not in reference to any tax loss. In fact no tax loss is required in order to levy a fine.

www.rossmartin.co.uk

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18th Feb 2010 10:09

Against the grain

I can't help thinking that if we don't consult with HMRC and just let them get on with what they want to do they will make so many mistakes in the legislation that it would become illegal and unworkable. The fact that we are actually helping draft a legislation against us seems to go against the grain. 

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19th Feb 2010 16:58

Deliberate wrongdoing

I agree exactly with Mark Lee.  The consultation makes clear that only fraud or dishonest conduct should be caught, but the legislation does not back this up.  I considered this to be part of the trend of widely defined legislation, limited by non-binding guidance, but I accept that Mark's explanation of a drafting error could be the correct solution.

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By Anonymous
03rd Mar 2010 15:09

I have replied have you ??

Apart from anything else it is a let off for the serious offender !

The more you read it the worse it becomes !

The consultation document 5.3 uses a different definition for wrongdoing to the draft legislation.

Look on the bright side once you have been done over liberty in tact you could get on with the lucrative business of actually advising on how to evade tax and earn some proper fees ! (intended to be satire, or words spoken in jest)

if you have not replied ? reply today !! goo on you know you want to !

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