NAO report: Be careful what you wish for!

I know that it is utterly wrong of me to question our 'elders and betters' at HMRC, but on what basis is an 'under declaration' determined.

I've seen some of the nonsense coming from HMRC  and frankly most of their penalties and assessments are at best exagerated and at worst spurious and wrong in law. It is not an 'under declaration' to pay less than the maximum possible amount of tax.

Equally, if taxpayers (not customers) are deliberately falsifying income statements in tax returns then that has to be dealt with - but I don't think that is what this report is saying.

Cynical - Moi?

Over to you C_D!

This is a brilliant summary and I'm sure did take several days to digest and summarise.

I'd take issue with HMRC's assertion that they "don't know which agents are good and which are bad (para 8) and therefore cannot concentrate on high risk agents (para 9). They are effectively admitting that during all of the enquiries and investigations they've embarked upon that they've never assessed the quality of the agent during what are usually long negotiations. I believe this was because of the rigid principle (enshrined in law) that it was the taxpayer's responsibility to get their affairs right and the agent had no responsibility.

This strategy is now coming back to bite them in the proverbial. Registration of agents might help but it would be costly simply because there would have to be ongoing monitoring via annual returns in order to be effective. I don't like spending money but some sort of registration fee might have to be imposed.

Tom Egerton

Rebecca has indeed done a masterful job here. Let's hope it inspires some proper debate, although the fact that the first two comments have chosen to question HMRC rather than the profession is evidence of the delusion that has always stifled grown-up conversation on these issues. That the article has been read over 250 times but only 2 people have even attempted to comment isn't an overly positively sign either that tax professionals are able to engage in debates that require a little introspection.

The report shows the problems faced by HMRC and should, I feel, explain the stance it feels it is necessary to take. I feel sure all professionals on this board are whiter than white. I'm sure they have never taken a shortcut or sought to underdeclare (or overdeclare) tax on behalf of clients. But that doesn't mean it hasn't happened. After all, tax is complicated tight? Even with years, often decades, of experience I suspect we all make the odd mistake from time to time. But funadamentally we know what we are doing because we are professionals...

Problem is the facts don't quite support that as Rebecca's article points out. And remember this is a report by the independent National Audit Office, so not one expressing any motivations HMRC might have to question the quality of the tax returns it receives. So is this simply saying there are a load of cowboys out there? Or genuine tax professionals who just aren't very good at their jobs? Is it represented taxpayers have more complex affairs so you might expect there would be a greater variance (and it would be greater still if they were unrepresented)? Or something else?

It seems to me this is the legitimate debate within the profession that Rebecca's article should stimulate. It is disheartening to read comments that, once again, turn the criticism back on HMRC or question the numbers. That seems like a wholly unproductive and unfortunate way of proceeding. It doesn't strike me as very becoming of us, particularly as professionals, to never look in the mirror and instead always say,"it ain't me guv". For me, the report shines a light on the poverty of that argument because it shows me, at a macro level, the issues faced by HMRC and why they may take the approach they do on a micro level. If you were faced with those numbers, what would you do differently?

Here's looking forward to a considered, balanced debate that shows a willingness to engage in some thoughtful introspection. We haven't seen that in the immediate reactions of the representative bodies, which is very disappointing, but hopefull we can see it here. I'm certainly willing to take part in that debate, but not one that just wants to use the report as another opportunity to attack the "other guy".

• I do not believe the above information is correct and I am sure that anyone with practical experience will see through the figures. HMRC know, and therefore target, taxpayers with agents because they know those who co-operate with HMRC end up giving accurate information that in turn makes it cheap and easy to collect tax. Agents who prepare tax returns for the taxpayer to file themself would slip under the radar of any attempt by HMRC to monitor agents, you only need to look at the example of the USA to see how many unregulated tax preparers avoid the IRS.
• The organisation still is, as the NAO stated, a national disgrace. To anyone who isn’t deaf, dumb, blind, an apologist for HMRC, or a hypocrite who has left the practicing profession but who lectures those who remain on the basis of an unreal world that no longer exists, HMRC is blatently in a state of organised chaos and falling apart from the consequences of bad management and political interference. It can’t perform its function efficiently and is providing a lousy service. The idea of it being able to collate the information necessary, never mind find the staff to properly asses all professional people, is just another fantasy land concept that diverts blame from the real problems.
• As long as we could have an independent complaints body (Completely outside the control of anyone at HMRC) that would have the positive duty to enforce standards and then the power to discipline everyone, including giving the chop to Officers and Officials (INC. pension benefits), in HMRC then I’d be delighted to have that same independent body apply the same standards to the profession and me.   

With reference to your first paragraph, could you suggest what I should do when confronted by incompetence from other accountants in the course of my work? Or what I should do when an RPB deems that a very basic error by one of its members is unworthy of investigation? I've been hoping for the past 20 years that HMRC would weed out the cowboys but standards now are in my experience worse than they've ever been.

HMRC have all the powers they need to make a start on the process of cleaning up the profession via enquiries and investigations. If they need advice on how to target their enquiries, I'd be happy to give them a few pointers because they've admitted they haven't got a clue where to start.

Tom Egerton

This strategy is now coming back to bite them in the proverbial. Registration of agents might help but it would be costly simply because there would have to be ongoing monitoring via annual returns in order to be effective. I don't like spending money but some sort of registration fee might have to be imposed.

Tom Egerton

Posted by thomas34 on Sun, 17/10/2010 - 12:42

Registration & monitoring can ONLY be embarked upon if proper and rigorous safeguards are built in. This MUST include the ability for agents to see all records kept by HMRC as part of this monitoring process, and, facilities for challenge of those notes including financial compensation for damage & losses incurred due to incorrect and/or malicious information being recorded.

Otherwise we would faced with a situation where any agent who actually argued with HMRC and did not simply accept their often erronious and frankly ludicrous assertions would be labeled a "troublemaker" and quickly find it impossible to sile accounts without an automatic "enquiry" - which of course would constitute a "legalised" course of harassment & restraint of trade.

Also, in the interests of justice, who is going to register & monitor the tax officers?

Instead of wasting money trying to shift the blame, HMRC should concentrate on getting its own house in order.  Remember this is the department that gave us the coding notice farce and followed that with the PAYE system farce where millions of taxpayers have not paid the right amount of tax due to basic failings in Revenue systems.  Now they want to monitor us?

How about a nice simple solution- only those who have sat and passed the CIOT exams will be allowed to deal with tax (both within the Revenue and in the real world).  Until then most people who handle tax on both sides are basically underqualified for the task (accountants doing tax? CTA's don't do audits, stick to your area of expertise please!).

I know, not a practical solution but HMRC pronouncements about agents always get my back up when they are so far off the mark.  And before the deluge of protests, let me say that I feel sorry for the people working for HMRC as they lack training and lack in proper update facilities and are continually moved around to meet whatever 'target' needs dealing with next, then shifted around offices, merged, staff cuts and useless computer systems- it's little wonder most struggle to cope.

High time the 'working together' team was replaced by people who actually deal with the day to day failures of the system rather than representatives of the pen pushers on one side and big firms interests on the other, then we might see some real progress.

CPD for all HMRC staff please (and I mean tax related not the latest 'health and safety' seminar), stop cutting staff when they can't cope already, work towards a simpler tax system and allow Inspectors and others at the sharp end to make more decisions as to where they feel resources should be aimed at in order to maximise 'fair' tax revenue.

'Monitoring everything achieves nothing'  if only Labour had taken this on board and not infected all walks of life with the opposite!

Is it not possible that the higher percentage of underdeclared tax in those clients using agents, is because most of the clients will require accounts to be prepared whereas those who don't have an agent are more likely to have simpler affairs.

Given that most clients now operate their book-keeping systems on some proprietory software package which the average agent cannot scrutinise (cost effectively) in great detail there are bound to be errors or mistakes. Most firms I have worked for have taken the view that we take the clients figures from their software and only if something looks wrong through analytical review or requires analysis such as large repairs or professional fees does it get looked at.

How many of the under declarations had little effect on the tax that should have been paid?
E.g. are we doing with a lot of very small under declarations (e.g. missing out the interest on a bank account) and a few very large under declarations? Or are 1 in 4 tax payers leaving significant income off the tax form?
 

How many of the under declarations are on items that are not easy to get right? Missing out the rental income from a “buy to let” is very different from claiming borderline capital improvement as revenue.

One issue I have seen is that a lot of people don’t think they need to tell the HMRC about anything the HMRC already know and they believe that all the tax statements from their banks and employer are send to them by the “tax office”. The common belief is that the government is watching everything we all do and therefore already knows all of our income.
 

As Trevor Scott said above, many accountants do not register as an agent. In our area of the country, there are many accountants who do not submit a 64-8, even some chartered practices don't bother. We don't even know if they are registered as agents?

How can HMRC get statistics on these accountants? Would they be exempt from any new legislation?

I would argue that it is difficult to draw conclusions from this sample that agent represented cases result in a larger tax loss for the following reasons:

1. Represented Taxpayers are likely to have larger or more complex tax affairs than non-represented Taxpayers, otherwise they would not need an agent.

 2. Represented Tax payers will more readily settle disputed tax when it is cheaper than continuing to pay professional fees. The time of unrepresented taxpayers is free. 3. Unrepeated taxpayers tend, in my experience, to claim less as they are not certain what they can claim; therefore they are less 'grey' issues to query.   This is not to say the conclusion is necessarily wrong, just that the evidence does not appear to support it.  

The statistic that there is greater incidence of tax under declarations where an agent is involved is misleading and an unfiar biased headline grabber.  It needs to be investigated further.  The report clearly says that they have not looked into cases relating to over declarations.  Why?   One suspects that HMRC would not want the headline to be 'unrepresented taxpayers are more likely to overpay their tax' and so this avenue was probably abandoned early on when the likely results became apparant.  It stands to reason that the average unrepresented taxpayer will probably not fully claim the capital allowances and other reliefs etc that they are entitled to whereas any half decent accountant would have the taxable income whittled down to the legal minimum otherwise they are not doing their job.  Consequently when the taxpayer is found by HMRC to have fiddled a bit of cash, the represented taxpayer would end up with an underdeclaration, but the unrepresented taxapayer may well unearth additional allowances to counter this.

I would say well done for digesting these issues for us.

In teerms of the agent's errors I would love to dig down and see what they represented - were the differences of opinion or expenses obviously spent but not supported by receipts or mileage done but not recorded by the client?  Some of them may have been settlements just to move on rather than rack up extra costs or the sort of horse trading you refer to?

Were they mistakes or deliberate?

Are different standards used when investigating represented and unrepresented tax payers - was there an off set in that the unrepresented taxpayers had missed off some important claims that the inspector may have added back?

a statistical average can also be misleading - what were the largest and smallest? where was the greatest range.

I like you remember the days when we had a reputation with our local DI as good accountants and we knew the inspectors too - and which ones would send you inacurate spreadsheets with daft assumptions. ("See my spreadsheet proves he had no cash on 14th October and could only have bought those paperclips with undeclared income" or some such)

I do think we need to look at better working and if I had access to codings then yes it would be good - lets face it they taught me how to do them when I worked there and generally if you ask for a coding to be changed they just do it.

I think though some recognition that we are doing more of the work that they once did - paticularly with online filing - I can remember staff employed full time on dealing with forms P46 for an employment agency! So may be registration should be free!!

At th end of they day I have always been an early adopter of the technology to do more (els, ct online, paye online) as it suits me and I believe offers a better service to my customers and so I am happy to work with them.

As a small firm I am unsure how my work will be checked as I get few enquiries (none in the last 3 years) so even if i got one they didnt like would that be detrimental - and why should my clients suffer an investigation so they can check my work?

May be I'm rambling but just some random thoughts from what I've read to throw into the debate!

It is always interesting to see how poeple react when questions of standards are raised. However you read the report I think it is clear that the level of underdeclarations is too high. Why agent's work is apparently worse than the taxpayer is debateable. We all make mistakes from time to time but nearly 4 in 10 returns is more than my experience would suggest is normal for most experienced agents. Some of it will be down to clients not providing all the information, (either deliberately or forgetfully!). Some of it will be due to poor work standards. Some of it will be the 'grey' areas where it is not worth arguing.

On reflection I think some kind of QA system where HMRC measures the error level of returns on an objective basis would be helpful. They could soon identify those agents who perform poorest and concentrate on those. However that assumes that HMRC are resourced sufficiently well to conduct proper representaive sampling in an objective manner and then not over-react to the outcome. I don't think agent registration with HMRC would help. There are already sanctions which HMRC can apply if an agent knowingly assits with making incorrect returns. Regsitration would just become more paperwork and probably cost.

The debate will rage on but I think there is a real opportunity for the profession to be positive and provide some resources to drill down into these figures and really understand what is happening. - Any volunteers?

The bad ones are the ones not qualified....

Easy to tighten up, if you want to be an Agent you have to have an ACA after your name, that will stop it.

Im still considering whether to let teh ACCAs be part of it ;o)

I don't believe that HMRC do not somehow score tax agents as part of their risk profiling - they would be fools not to.  I have head anecdotes over the years that they do this unofficially (see Taxaid Meeting Points in Taxation 30 Sep 2010).  Does anyone know for a fact?  FWIW I can't see a problem with it - use a dodgy accountant and you are more at risk of an investigation.

I would also support registration of tax agents so at least it starts to address the issue of unqualified agents and hopefully over time the overall competence and integrity of the agent population can be raised.  The issue is perhaps not so much the competent unqualifieds but there are agents out there who should be locked up - or indeed have been locked up but are still practising!

The only point that I would make regarding the findings by HMRC is that the cost of employing professionals to argue the pros and cons over a relatively small tax bill may result in an attitude that it is cheaper to concede a small adjustment than it is to pay the accountant to continue to argue the point.

We are often in a position that the professional fees dealing with an enquiry exceed the tax liability. Anybody dealing with their own returns can spend as long as they like arguing points without a financial implication.

we need to know how the underpayments are made up....mistakes, settlements when undergoing enquiries or actual evasion....a mix of the three and more?!  The analysis is just not in enough depth.

As for being CTA/ACA etc qualified, why not...it would be simple...although presumably the 'back room' staff preparing the records would also need to be similarly qualified based upon this suggestion?  Like I said lets get better analysis....like how many of the 'represented' were chartered....presumably at least some...before we put these type of suggestions forward.

I read this article with a lot of "what is the next stage or 2 stages on" thoughts in my mind.

I have no problem with agent profiling, but think that it should not be HMRC but an independant body to oversee both HMRC performance and agent performance. And HMRC should not have the power to remove the agent, but an independant triburnal.

Sadly, I can see an annual agent register fee, £500 PA, coming. This would indeed cover the additional costs for HMRC and may bring in additional much needed revenue.

Lastly, Looking at 3 stages after the agent registation. I can see a privatisation of HMRC. If agents can change tax codes and can deal with payments, then there will be no need to have HMRC processing staff. Agents could do this themselves. HMRC would become the reporting organisation for authorised agents and will just inspect its agent's files periodically. Tax agents will become low paid HMRC agents, who will have to deal with all the shortcomings that are at HMRC. People may not think this will happen, but they are proposing giving greater scope to authorised agents, what next in say 10 - 15 years time. Look at other public sector services that have been privatised, why not HMRC?

I seem to remember those days when the Birmingham tax office was registering in the region of 80% to 90% errors in their calculation of tax assessments .... this was before Self Assessment, and memory says the figure for incorrect assessments was over 90%, but it is a few years back, now, and these leetle grey cells are not quite a hot as they once were. Now Birmingham tax office is a biggie, or at least it was back then, so if my remembered statistic is anything near correct, it's a horrendous stat.

In the meantime the Revenue has neatly side-stepped this problem by offloading it onto us agents. No longer does HMRC calculate the tax due, we do it for them, so no wonder that we are getting it wrong ... after all, HMRC couldn't get it right, so why expect us to? And looking at these statistics, we're actually doing a hell of a lot better than IR Birmingham was back in the '80s.

From a personal perspective I've spent more time this year than ever before checking up on the work I send out, and keeping myself abreast of new tax legislation, not to mention new tax guideline interpretation. But as long as tax legislation keeps getting more complex, and as long as there is a whole host of smaller businesses out there who need tax help yet can't afford a the highest-fee highest-quality tax professional, then the number of errors in tax assessments is going to remain a problem. I honestly see the only way out of this mire is to simplify the tax system.-- KH

It really depends on how you interpret statistics. The figures showing that represented taxpayers pay more tax when there is an enquiry may be because the agents are actually doing quite a good job and giving the figures to HMRC.  If the taxpayer is unrepresented HMRC  have to do the work and they will not spend the time and effort to find the real shortfall. This would suggest to me that HMRC  should be concentrating on the unrepresented taxpayers because they are  underassessing them.

I thought we had to register - I certainly pay £125 a year or something MLR Registration, or don't tax agents have to register???

How about a nice simple solution- only those who have sat and passed the CIOT exams will be allowed to deal with tax (both within the Revenue and in the real world).  Until then most people who handle tax on both sides are basically underqualified for the task (accountants doing tax? CTA's don't do audits, stick to your area of expertise please!).

Hopkins-Hogg

Frankly unworkable and no guarantee that the quality of work produced by agents will be adequate.

We are fortunate enough to acquire a large number of clients by recommendation on a regular basis and I can assure you that the quality of work emanating form "qualified firms" (of all sizes) is quite regularly of a shockingly poor quality. From failure to operate CIS/PAYE adequately, to failing to observe that clients have breached VAT registration thresholds, to failing to pay dividends in proportion to shareholdings, to arith errors in accounts filed with Companies House etc. etc.

Of course none of this detracts from the real problem staring us all in the face namely that HMRC is entirely dysfunctional. The situation is so bad that it's difficult to know exactly where one would begin to re-assemble HMRC to the point where it could function reasonably efficiently at even the most basic level but I do think that it is about time that representatives of the professional bodies started to rigorously take this issue into the wider "public" media and HRMC's global failings be placed under detailed public scrutiny.

As far as HMRC is concerned we all deserve much better and to be blunt until HMRC can demonstrably put its own house in order it will not have the moral authority to address more generalised problems within the profession or anywhere else. 

Aren't we already registered as tax agents? If not, why do they check who we are before discussing client's details with us, and how do we get to submit client's returns on-line?  Does registration actually mean refusal to allow some people to act as agents?

I think it is a great idea to monitor us with a view to identifying the bad agents and the good ones, but surely they are doing it already. If they are not, then why not. Maybe Wild Billy could give us some input here.

Maybe Tom 7000 is correct . . . .

But I expect that the majority of non-qualified practioners would have had the wit not to post the same comment three times.

C.F.

Our clients come from the same population who choose not to be represented. Therefore the "normal" level of incorrect returns from agents should be 26% based on what the data suggests is the honesty of the general public. The additional 11% increase in "errors" caused by agents might not be statistically significant when one considers that our clients have more complicated affairs. After all the report does note that agent errors amount to "only" 15% of the tax liability.   

If accountants can only do accounts and CIOTs can only do tax, where would the CIOTs get their numbers from?

I like Tom 7000's suggestion, but would not like to have to justify it.

As Rebecca says, the data is old and almost cursory.  And so many suggestions based on it!  They're wrong, we're wrong, it's all wrong.  What is clearly needed is a thorough understanding of 'what's so', a more detailed set of data and questions answered.  This is a measure of the outcome of our professional involvement in the national economy, and I suggest we're speculating with less understanding than we have of our household budget.

 Only two brief points to make;

Unrepresented taxpayers who find themselves involved in an enquiry are almost always advised by HMRC to seek professional representation - especially if there are early indications that significant amounts of tax etc are at stake.

If an Inspector has a choice of two cases to take up for enquiry, a judgement will be made that may very well    factor-in that Inspector's experiences of both professional representatives. 

@ Dave Collier, if you or your practice is a member of a CCAB body you don't have to register with HM Revenue as under the money laundering regulations. Instead you are regulated by your professional body.

I made this comment on the ICAEW site too.

The methodology behind the figures in this report is highly questionable:
The NAO took its sample from data supplied by HMRC on the outcome of "random" enquires back in 02/03 to 04/05. HMRC's data was incomplete, because the department did not retain records of any enquiries where there was a tax overpayment, no adjustment, or the case was settled by agreement.

So HMRC was only able to supply data in some types of cases where there was an underpayment. This raises the question, Why did HMRC keep some data and not others? It seems a bit odd. Were these really all "random" cases or did HMRC include all cases? We have no way of telling. If not all cases then again, why did HMRC keep some data and not others - what use would keeping only a third of the data be to HMRC? What of the errors? If they were the advisers errors then perhaps someone can explain why were penalties charged?

I agree with the ICAEW's Paul Aplin who said that he found the report "unhelpful".

More interestingly in all this is the fact that tax advisers/agents do not generally perform an audit, unless asked. I wonder how much checking firms manage when they quote that they can knock out tax returns for £100 to £150. I would guess that the fee level will be quite a good indicator for HMRC. Perhaps it could spend its limited resources better by just picking out firms for enquiry according to their internet advertising than bothering with a registration process.

Virtual Tax Support for accountants: www.rossmartin.co.uk

Should we really be surprised that represented clients are more likely to "understate" their tax liabilities?  As profssionals we rightly have to work within the law, but this allows for/requires judgement in many areas.  It also our job to get the best result for our clients, again within the law (lets not get into the whole avoidance/evasion issue) so it can be expected that sometimes these judgements would give the benefit of the doubt to the tax payer.  If, on Revenue challenge, they find they disagree with some judgements and up the tax bill this is not realy a surprise, especially as the fees for arguing over such areas are often likely to outway the tax benefit.  There is no apparent suggestion that the majority of agents are breaching laws or even being unreasonable in arriving at the figures they use, only that the Revenue may disagree with them in some instances.  If the majority of cases showed an overstatement of tax liabilities  then we would clearly not be doing what our clients pay for and could expect a substantial rise in PII premiums!

That said I 

too have come across some examples of appalling advice and accounting from some agents (not all unqualified) and would be happy to see a bit of weeding out of those who abuse the system supposidly to benefit their clients who end up carrying the can.  I am happy for the Revenue to keep tabs on my performance (nothing to hide) and if registration helps get rid of the charletans then why not?  It could even be good for business.  

Or so my stats lecturer used to say.

I can see that we in the profession need to take notice of these statistics, but....

The report states that these are "random" enquiries.  I seem to remember that HMRC once stated in the past that many random enquiries are actually resolved without contacting the taxpayer!  These are presumably the simple P60, P11d ones and the taxpayer concerned is likely to be unrepresented.  Result, enquiry closed with no additional tax.  If this still occurs it may have a huge impact on the stats.

Complexity must therefore distort the figures.  Further analysis as follows would be revealing:

1)  How many returns are submitted annually in total.

2)  What is the ratio of represented to unrepresented.

3)  What proportion of each category are "in business".

And of course the killer statistic, how many underdeclarations on the represented side were as a result of agent errors, and how many were due to the taxpayer "omitting" information?

Let's also see the stats for the non random enquiries.  I bet they show a different picture again.

Also as mentioned previously HMRC often suggest that an unrepresented taxpaypayer appoints an accountant if the investigation involves accounts/business income.  Are these categorised as represented or unrepresented in the stats?

What about the like's of people like me who have been working in tax for some 26 years but are qualified by experience but not actually have any professional qualifications?  Will we be suddenly out of a job if HMRC go down the registration of agents' route?

It would be impossible for HMRC to obtain an accurate picture of bad agents without a far more detailed and costly look at what actually went wrong with each Return.   Unknown to me, my client took advice from a financial adviser attached to her firm of stockbrokers from whom I receive a copy of her annual tax package; she assumed that they would include any relevant information about the surrendering of policies in that annual tax package but they didn't. Although on my annual request for information from my clients, I specifically mention chargeable event certificates, my client did not produce any to me or mention that she had surrendered any policies.  Her Return was wrong and the tax due was significantly understated, although there was no way I could have known this.  So, because my client was represented, it will count towards the represented percentage, but the error was not due to any mistake of mine and it would be wrong to assume that I was a bad agent because of it.

I am sure HMRC know of 'dodgy' accountants. 

An accountant not too far from us was notorious for overdeclaring expenses, but charged fairly hefty fees. If I got an enquiry from a potential client that had used this accountant I used to tell them we do the return correctly, or not at all. Some signed up, some didn't.

I must admit I kept a copy of some accounts prepared by this accountant (but anonymised it) just for the entertainment value ;)

I recently heard that this accountant had all their clients investigated and is now languishing at one of HM leisure centres.

This surely indicates that HMRC know who the real rogues are!

Possibly. Just like unqualified lawyers and doctors when regulation came in. 

Possibly. Just like QBE lawyers and doctors when regulation came in. 

The bad ones are the ones not qualified....

Easy to tighten up, if you want to be an Agent you have to have an ACA after your name, that will stop it.

Posted by Tom 7000 on Mon, 18/10/2010 - 11:27

What utter rubbish.

Check how many accountants are prosecuted each year - then check how many are qualified - and the majority are qualified accountants.  Letters after a name are no guarantee of honesty or ability.  Indeed QNEs have to be more careful as they trade on their reputation alone. 

As for HMRC - the phrase people who live in glass houses springs to mind. If people were fired for incompetence HMRC would be devoid of managers by now. 

If any branch of qualified/unqualified accountants are going to be out of a job fairly soon, and I doubt it somehow, then I'd opt for either weather forecaster or guru as my next job, both of which I'm sort of qualified for .... guru, since no one can prove you wrong, regardless of how much pie in the sky you sell (just pay £5k up front for this ceremony to ward off the evil which has not yet manifested, etc), and weather forecasters who always get paid excellent money for always getting it wrong (and since the weather changes every five minutes in Scotland, only one forecast, "changeable", has ever got a chance of being correct).

Last on my list of potential job applications would be HMRC tax inspector ... although I'm also sort of pretty well qualified for that job, too.-- KH

Enquiry methods have changed greatly since 2005, but even then I generally found that most 'random' enquiries were anything but random.  I'd love to know more about the sample - and why it apparently takes HMRC 5 years to collate the data on enquiry trends...

Other information I'd like to see:

1.  How much of the so-called 'under-declarations' are purely timing differences, or have intra-group contra's?  From recollection in the years to 2006 or so many inspectors wasted their time on challenging pension accruals, emoluments, etc - even when the company was making losses.  HMRC amendments often improved my clients positions for groups when the group as whole was looked at over a multi-year period as it often turned brought forward losses of the next period into current period losses which could be group relieved.  Other large HMRC adjustments which actually saved the client money included reclassifying repairs as capital and vice versa, moving expenses from small-company rate periods into standard-rate periods, transfer pricing adjustments that imported profits into the UK from higher rate countries, etc.

2. How many of the 'under-declarations' reflect actual tax under-payments using the standard civil court approach as opposed to HMRC's 'prove you are innocent beyond any possible doubt' attitude that I often meet?  I'd be very reluctant to accept the 'if they paid then they were guilty' party-line - my one-time favourite HMRC comment ever was 'prove that you didn't think about selling the company earlier', the inspector seemed to think that the board minutes should have included a line to the effect, sad to say the client caved in on that one.

3. Define agent.  Is a bulk-claim merchant an agent?  The NAO report definition says so and I've yet to meet an accurate bulk claim.  What about the film-partnership and R&D claim merchants selling losses?  The Capital allowance boutiques that make claims without talking to the surveyor who actually ran the job?  The error rates on some of these that I've come across approach 100%.

4. As noted above, if during an enquiry, the inspector finds an under-declaration, then late claims can be made to reduce the inspectors adjustment.  As such, barring the adjusting error itself, the higher the quality of the original return the greater the chance of an under-declaration being determined during an enquiry.

5. Anecdotally it seems inspectors tend to take a harder line on represented taxpayers - I've known taxpayers get away with murder whereas I as an agent can expect deadlines to be more rigidly enforced, etc - and while I'm paid to deal with the grief several ex-HMRC staff I know have said they hesitated to 'bully' pensioners/etc making it more likely for adjustments to be made with an agent.

 Does it matter if you are ACCA,CIOT,ATT, CAT,AAT,QBE,Etc

What matters is, you do the right job or you don't.

Many people are registered with their own organisations and not HMRC.

It does not always matter how high a ranking qualification they have, they can still make a bad cup of tea.

CIOT deal mainly with the higher level of taxation (or am I wrong), Stay where you are and stop trying to corner the market.

There is plenty of room out here for all of the establishments. As HMRC point out, you have to get rid of the bad eggs in the basket, not everyone but CIOT.

The fact is that HMR & C's service is at an all time low now that it is so centralised.

This is based on some 40 years of practise as a Chartered Accountant in various practices including my own.

When you could speak to your local districts or even their DI's a rapport was built up of mutual respect.

They definitely knew the wheat from the chaff.

Now call centre staff do not comprehend the question let alone know the answer.

Tom 7000 (Mon 18th Oct 2010) posted " The bad ones are the ones not qualified....  Easy to tighten up, if you want to be an Agent you have to have an ACA after your name, that will stop it.     Im still considering whether to let teh ACCAs be part of it  "

 Tom 7000,  after all the problems the Big 4 (ICAEW regulated) firms have caused by Audit (or non-Audit) of our Banking system and the Tax Avoidance schemes these Big 4 come out with, are you still seriously suggesting that only ACA designated be allowed to be Agents for taxpayers sending in Tax Returns to HMRC?  My friend, the Treasury will go BROKE in no time !!

Rather than HMRC introducing a new regime for registering agents etc with the associated cost, admin etc it would seem  to me much more effective to require all agents to be a member of a prescribed professional body (e.g. ACCA, ICAEW etc) otherwise they are committing an offence.  The professional bodies already have a framework of ethical standards, disciplinary procedures etc.  So if you get struck off then you're out of business, which is as it should be.  I know of accountants who have been struck off and banged up for fraud but who still practice with impunity.   As to the unqualifieds?  Why don't we resurrect the AAPA and grandfather all existing unqualified tax agents into this body, as happened to unqualified auditors in the 1960's.  Simples.

...is surely that we are now more mobile with a global revolution in the workforce.  Big companies welcome churn  (joiners and leavers) in their workforce of 15% annually. No wonder it's a job in itself to keep up with who does what and where and for whom.

A prescription for change:-

Tax simplification

IT investment that enables agents and HMRC to work on the same side.

What does the taxpayer want? To know how much he/she owes, so they can pay the bill and get on with the business.

What do most agents want? Less headaches I suspect. Same money, less hassle.

What does HMRC want? Less pressure from the Treasury to find more tax with less resources.

So surely as a body it's tax simplification and IT that works we most need to support and encourage!

Comments welcome.

I'd say that registration is on its way.

Whether it will apply to members of RPBs in the first instance is debatable. HMRC reckon that 30% of an estimated 43,000 agents are non-affiliated with the remaining 70% members of a Professional Body (note they've dropped any reference to "qualified accountants" at long last).

I can foresee an initial fee (£500?) for registration which would bring in £6.45M to pay for the set up costs - more than enough to get 12,900 non-affiliated agents on to the register. Once they've bedded those in they can decide whether to include members of RPBs but logic says that everyone should be included eventually. An annual fee thereafter of say £125 would contribute towards the processing of annual returns.

Logically they would subsume their MLR registrants on to the new system and I'd hope that my £120 p.a. MLR fee would be included in the new annual fee.

Registration won't stop all the cowboys but will make it more difficult for them. Disbarring anyone from being an agent will not be a restraint of trade because it will still be legal to prepare accounts and tax returns - I have electricians on my books that have to get certain work "signed off". HMRC can set their own minimum standards for registration particularly in the areas of PI insurance and CPD.

I believe that we have at present a ridiculous state of affairs where, since self-assessment around 13 years ago, HMRC have sleepwalked into a position of not knowing whether the average tax return is accurate or not. If they start the process now they might make some proper progress in about 10 years. Hartnett and Strathie are paid vast sums of money to get this right although I'm not holding my breath.

Tom Egerton

...I would just get my clients to register individually for on-line filing, and then I would use their login IDs to file their returns with their permission.