HMRC ‘dishonest agent’ letter wreaks havoc
Members of the community have thrashed out at the “accusatory” tone of a letter sent by HMRC headed “Dealing with dishonest tax agents”.
According to one disgruntled agent, AccountingWEB member perpetual, the letter included seven pages of guidance on how to complete a tax return, followed by a two page memorandum of agreement (MOA), which had to be signed.
Perpetual admitted filing a large portion of refund returns, but said his firm’s service was new with roughly 150 clients and CIS refunds totalling around £300,000, of which £3,000 was returned to HMRC as consequences of review/enquiries.
The main point of objection was seemingly being forced to sign the MOA through coercion.
“If we don’t sign we are being threatened with blanket investigations or withholding of all refunds relating to our clients,” he said. “The MOA also puts forward that we agree to changes in our practice, which they haven’t seen. That we agree to a review of our procedures and meetings to discuss our work.”
Adamant that his firm completed accurate returns, to the best of his knowledge, Perpetual said it was ultimately the clients’ responsibility and put the predicament to the community.
Other accountants were keen to advise how best to deal with this situation, with most recommending “don’t sign anything without taking advice”.
Nichola Ross Martin advised discussing the issue with a professional body and added she could not imagine that they would have written to him without “considerable due diligence”. Others suggested getting a solicitor involved and “kicking it back at them”.
Perpetual came back saying his next stop would be to write “a stern letter” to HMRC putting the firm’s case as to why they won’t sign, but were willing to cooperate.
Flash Gordon, Ding Dong and others advised against a heavy-handed, threatening approach. ShirleyM also took a more restrained line: “If you go in with the heavy guns blazing it may indicate that you want to head them off before they get into the pass (looking at your records and procedures).”
It was down to tax editor Rebecca Benneyworth to point out that the dishonest agent process had not started yet and that the process for dealing with a dishonest agent was quite different from that outlined in the original post.
“It cannot be an accusation as this can only be sent in a determination, against which there are rights of appeal,” she said. “Maybe OP has understandably got het up about a challenging letter and read a bit more into it than it says. HMRC has also NOT commenced ‘agent view’ nor is this currently what agent view will do as currently proposed.”
Commenting on why Perpetual’s firm had come under the microscope, Benneyworth said the Revenue had separately been looking at high volume repayment agents as a risk category.
“Be assured that resources are only expended where risk is identified. You can easily demonstrate that the risk does not apply to your clients so that should be your objective,” she said.
Perpetual then said they wouldn’t be claiming for defamation and opted for a more measured approach rather than “going ballistic” at them.
As reported by AccountingWEB in recent weeks, action against dishonest agents has been envisioned as a rare avenue and only a handful of agents are likely to be caught.
Retired barrister John Flood, who wrote about the “trouble ahead” for dishonest tax agents, agreed that it will not be used frequently, but added: “I think they are worried about the smaller firms who can be less than scrupulous in the conduct of their affairs.
“The standard of proof is I believe to the higher criminal standard. This is because of a variety of Human Rights case which require this standard when the sanction is significant notwithstanding that the country concerned operates a scheme under its civil law.”
He added: “If they do suspect something it is now their practice to try to resolve things without the need for a tribunal case and to prevent repetition of misconduct and sometimes a blanket approach is adopted for all in a particular area of concern.”
The original letter from HMRC was finally produced on the thread for the community to read, which led Flash Gordon to comment: “It's actually fairly warm and fluffy for HMRC” with others such as ShirleyM and Ding Dong agreeing that the letter was reasonable.
An HMRC spokesperson told AccountingWEB that the letter was part of day-to-day compliance work to address the risks that many repayment agents have been found to pose to the Exchequer.
“This work has been going on for a number of years but it appears that the author is one of approximately 120 repayment agents that have recently been written to about HMRC’s concerns in this area. The work is neither related to HMRC’s Tax Agent Strategy (which is currently only piloting client filing and payment issues with a very small number of tax agents), nor does it relate to the new Dishonest Tax Agent legislation that only comes into effect for offences committed after 1 April.”
“In essence, it invites the agent to consider the returns submitted against the risks HMRC believe to be present. HMRC looks forward to working in a collaborative manner with the author or any other agent who may have received a similar letter to openly discuss the issues identified to bring matters to a conclusion based on the facts presented”, the department said.
Have you received a similar letter from HMRC on this topic?