Regulating the tax profession is complicated | accountingweb

A new regulator won’t help the tax profession


Concerns about how the tax profession is regulated are justified says Ray McCann but, given the complex nature of tax, he feels that a new regulatory body is not the answer.

10th Feb 2023
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Founder of the Tax Advice Network, Mark Lee, is right to have concerns about how the tax profession should be regulated. In recent years the reputation of tax advisers has been damaged, with those in the existing regulated sector bearing the brunt of public disdain.

It is essential to focus on the actual problem that whatever proposed solution is designed to solve. And it is here that it gets tricky – is it only unregulated advisers, poor-quality advisers, advisers who are not members of a professional body, advisers who spend all day drafting wheezy tax schemes? In the end, it may be all of these but focusing on those who are not members of a professional body is perhaps the best place to start. 

It would be wrong to suggest that they alone are the problem, but HMRC say that a huge proportion of the advisers they have problems with are not professionally qualified. How many of those outside of the professional bodies fully comply with anti-money laundering (AML) rules? How many even know that their AML obligations are not the same as members of the CIOT, for example? How many regularly do continuing professional development (CPD) or use an indemnity insurance provider? HMRC suggested not so long ago to Parliament that taxpayers often find an adviser in the pub. Who did they have in mind? Sadly all of us! 

Tax scandals

The demand for some form of regulation often follows the latest tax scandal (maybe Zahawi received poor advice!) and while this is understandable, knee-jerk reactions usually result in poor policy choices and the last thing we need is a solution that creates more problems than it solves. Various ideas have been suggested by the professional bodies but inevitably, artificial barriers are put in the way, preventing any progress. 

How tax advice is defined and what would be the effect on the cost to the consumer are two of the most common issues raised in response to any suggestion intended to improve the status quo. Even the recent HMRC consultation on regulating the tax profession that looked settled on making indemnity insurance mandatory was abandoned by the government with nothing in its place.

No new regulator

Coming back to Lee’s point, I don’t believe a newly created regulator is the answer. It’s not obvious to me that the Solicitors Regulation Authority (SRA) has reduced the small number of cases where solicitors do very bad things. And that is the point – apart from the aberration that has been the tax scheme scandal of the past 15 or so years, most tax advisers do a good job year after year and without them the government would have to spend a great deal more on making the tax system function effectively. 

There is already a regulator for professional bodies, the Office for Professional Body Anti-money Laundering Supervision (OPBAS). This has substantially increased costs but not, I suspect, increased confidence in the supervision of the anti-money laundering rules since it has no remit for those advisers who are not members of a professional body. A new regulatory body with responsibility for quality and ethics would not lead to increased public confidence – look at the waves of criticism existing regulators receive. But it would create very significant issues that would quickly impact on the quality and cost of tax advice, possibly forcing many solo advisers to do something else for a living. It might start with a remit that would include only those outside of professional bodies, but it would be unlikely to stay there.

It’s complicated

As I see it, the only way we can make any progress is to be firmly focused on reality. Tax is complicated – even tax for those who would not describe themselves as wealthy can be complicated and over the past several years the many changes to the administration of the tax system have made the task more complex still. Who outside of HMRC thinks that the earlier capital gains tax deadlines, the trust register, Making Tax Digital, and numerous other changes ease anyone’s burden? (And I support the move to a more digital tax system!) 

The other reality is that experienced tax advisers are not cheap and good-quality tax advice will always be beyond the reach of some. Many advisers charge (or are paid) less than the intrinsic value of what they do and too often HMRC shows little idea of what advisers are contracted to do and what they can, even with the best will in the world, be expected to do. It’s not the adviser’s responsibility to ensure their client pays on time or to spend hours chasing the client to do so. And how many advisers, despite endlessly chasing the client, find themselves working late into the night in the run-up to the 31 January deadline?

Regulated profession

I mentioned above the “regulated profession”. In my mind, this consists of members of the professional bodies and the employees of firms that are members of professional bodies. If the profession is to be regulated, and I believe it should, the existing professional body approach should be the starting block. We need a strategy that moves towards a point where only professionally qualified individuals can give tax advice. Even starting now that would probably take ten years or more. It is unrealistic to expect professional bodies to simply throw open their doors or for those advisers with many years of experience to undertake two or more years of study to become professionally qualified late in their careers. But the professional body framework could form the basis of a new approach, starting with an effective complaints system like the Taxation Disciplinary Board, and the government could look again at indemnity insurance. In that way those advisers outside of the professional bodies would have an incentive to maintain high standards, keep up to date and not get involved in dodgy tax schemes.

Effectively regulating the tax profession is hard, and it is hard because tax is hard. What is “tax avoidance”? Where is the line between tax avoidance and “tax planning”? What is “trade”? Even after so many years, “basic” questions of this type defy a black-and-white answer. Unless the government is prepared to step up, nothing will change.

Replies (20)

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By SXGuy
10th Feb 2023 18:24

I'd invite anyone to point me to an unqualified unregulated tax advisor who gives advice on dodgy tax avoidance schemes.

The question is always aimed at QBEs because for some reason accountants have this opinion that if you have letters on your name you could never possibly offer bad advice.

But in my expierence it is the big firms with highly qualified accountants that promote this stuff. Let's not forget also, the average person on the street doesn't see or care if someone is a member of a professional body when they have a bad expierence, all they see is the bad apple.

The majority of expierenced unqualified accountants just want to earn a living and make sure their clients pay the correct amount of tax. They are not concerned nor do they want to be bothered with all this crafty tax avoidance nonsense.

So yes, start with the regulated sector first, but keep some perspective.

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By Hugo Fair
10th Feb 2023 23:59

Full marks for the questioning stance that makes assertions, only to swamp them in turn with enough unanswered questions to drown them. But I can't see any kind of conclusion?

Completing/submitting a Tax Return is not a choice made entirely at the discretion of individual taxpayers, so you can't (realistically or morally) make it an action that is restricted to people with specific qualifications/membership (as per solicitors for certain documents).
So if the individual continues to be allowed to deal with their own returns, then there will always be a market for people who can 'help' them.

Whether that help is pure assistance (with software & technology) or added-value ('you could do x or y, the results being ...) or full-blown advice (right through to promoting schemes) is merely a matter of degree - and legislating to define & control those aspects will be like watching Angels holding a disco on the head of a pin!

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By jon_griffey
11th Feb 2023 10:26

Regulating the tax profession should not be ‘hard’. ‘Tax Agent’ is already defined in tax legislation and is a good starting point. Groups such as unpaid advisers, payroll agents, charities etc can initially be exempted but at least that gives us a framework to build on. As I suggested in the other thread after allowing for grandfathering I would have all future tax practitioners required to at least be members of a professional body like AAT or ATT. The exams are technician level and should not be a barrier to entry. I can’t see that existing QBE’s have anything to fear from being grandfathered into a new PB. Many will already undertake CPD, have PI and act in a professional manner which is compliant with PCRT etc so making this mandatory should see little change, possibly even improving their lot if they no longer have HMRC as ML supervisor. We then have a framework for complaints and weeding out the bad apples from the profession - including qualifieds that are involved in egregious tax avoidance that goes against PCRT. If someone could give me a mandate I would soon have this sorted.

Thanks (1)
Replying to jon_griffey:
By Tax999
13th Feb 2023 11:51

Ive done my ATT exams but dont want to be supervised by ATT or AAT. I dont need to so why should I now need to?

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By Calculatorboy
11th Feb 2023 21:11

Who is this man? Excuse me if I dismiss this nonsense

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By Tax999
13th Feb 2023 10:55

Hi there,

I am Ex HMRC and 16 years QBE running my own firm with AML registration under HMRC and full indemnity insurance. Why am I not with a professional body? Because they are more like gentleman's clubs than professional bodies, especially where I live.

Most of my clients come to me because their accountants (which automatically makes you a tax adviser apparently) are very lazy, they miss allowances, reliefs, legitimate opportunites to save the tax payer thousands of pounds at a time.

I have been a tax adviser for years, there is a requirement to know the accounting side for CT and PT purposes amongst others and so its an easier transition. Accountants going into tax is very different. Put in a regulator if you like but dont force me to put letters after my name to make me look like billy big bananas when most cannot provide their clients with tax efficient strategies (not schemes!!!!) never mind complete accounts by the due date.

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Replying to Tax999:
By Graham Suggett
13th Feb 2023 14:06

Billy big bananas! Thank you - that's made my day. As a former HMIT, I haven't got a formal tax qualification - however, I do have 10 years’ experience of working with the Creative Industry tax reliefs (4 years within HMRC and 6 years outside of HMRC) and know a huge amount (a lot) about a suite of very specialised reliefs (a little). Making me jump through some hoops for a qualification wouldn't improve my business or the service to my clients one iota. My suggestion, and this is particularly pertinent to R&D tax credits and any other repayment type situation, would be for HMRC to properly police their systems. Policing of standards has to come from the centre and the failure to properly do this because of under-resourcing or lack of will has been a conscious decision.

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By johnjenkins
13th Feb 2023 11:17

Why do we have to have another article on the same topic. If you read the other article you will find all the possible responses. Looks like Aweb are running out of ideas.

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By Ian McTernan CTA
13th Feb 2023 12:15

The last thing we need is more regulation of the profession.

What is needed is more HMRC staff, better trained, with more people dealing with the 'customers' on the sharp end.

I'd like to see all HMRC staff have to sit professional exams (say ATT level) so they have at least a tiny grasp of the actual tax law rather than IR manuals.

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Roy Mitchell
By Roy3112
13th Feb 2023 13:25

My business partner a chartered accountant wanted to retire a couple of years ago. We had always been supervised by HMRC, but I felt that I should really make sure that I was up to the task and took on the ATT at the age of 64, qualifying at 65. I`m glad I did as it improved my understanding and gave me confidence to continue to run the firm solo. I`m currently just starting my study of CTA at the age of 67 to build on my achievement.

If I want a medical opinion I would rather ask someone who is trained to source the correct answer rather than go by their experience. I often refer back to my training manuals when I am asked something and its with that discipline that I am happy to give advice.

With reference to insurance. Why should they be responsible for vetting the industry?

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By JackH
13th Feb 2023 15:54

Mr Zahawi probably got very good advice but was deterred from fighting his case through the Tribunals and Court because of the (even greater) adverse publicity. HMRC would be fully aware of that and no doubt exploited it to the full. You won't find that criterion for selecting a case and settling it in the Propaganda document that is the Litigation and Settlement Strategy. Nor will you find there under the heading of collaborative working the tactic of leaking a taxpayer's affairs (Shurely shome mishtake: Ed). Known as a Reverse Hartnett.

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By quixoteofthenorth
14th Feb 2023 05:02

It is interesting that the original suggestion this article refers to was proposed by a 'mentor' - added to which someone no-longer practicing as an accountant. Given the approach of some mentors, perhaps it would be more fitting to consider regulating 'mentors.'

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By rbw
14th Feb 2023 10:43

I have no professional qualifications whatsoever. But I did spend 30-odd years in IR/HMRC (plus a few in HMT) so I'll venture the comment that this seems to perpetuate the argument that "something must be done" means "everything must be done" with very little evidence to justify the policy. (In this article, regulation not even restricted to paid-for advice.)

I commend the conclusion from a report by academics to the EU Parliament last year:

"Overall, the report highlights a lack of impact evaluations on the hard and soft law instruments currently existing in the countries analysed. Restraint from adopting further rules governing the activities of tax intermediaries and relating to disclosure requirements, without an empirical understanding of the costs and effect of those currently in place is highly recommended."

On a point of detail, that report looks at the position in Germany where tax advice is a restricted activity. Do the UK professional bodies want that? If not, just what?

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Replying to rbw:
By johnjenkins
14th Feb 2023 12:06

The problem isn't with us, rbw, it's with HMRC. You've only got to look at IR35 and MTD to realise how inept they are. Any European study will look at the EU as a block.
Germany has always been restrictive, it is their way of life, whereas the UK is fairly flexible. Why do you think we wanted to leave the EU?

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By [email protected]
14th Feb 2023 14:54

Same thing happened 100 years ago in dentistry. Until 1921, anyone could set up and practise as a dentist without any qualifications. The 1921 Dentistry Act required that thereafter, all dentists should be qualified and registered. However, unqualified dentists who had been in practice for at least 10 years could register and continue to practise without qualifications. The last unqualified dentist (he was probably a very good dentist) retired in the 1970s. So it took 50 years to sort out. By 2073, will the tax profession be fully regulated?

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By ArianBloodwood
14th Feb 2023 18:17

I would be more amenable to regulation of the profession if an integral part of regulation was an obligation on the part of either the profession or HMRC or both to provide tax advice to poor people, micro-businesses and marginalised groups. I'm 35 years QBE and specialise in startups and micro-businesses (<£30k Turnover), and it is (or should be) criminal that such people find it (a) so incredibly difficult to register for and enter into the UK tax system and (b) almost impossible to access sound tax advice they can actually afford. The profession overall seems to think it's perfectly reasonable that people pay from 5% to 30% of their Turnover simply to comply with tax laws and pay their tax.

From what I can see none of the professional bodies discuss this aspect nor believe their members have any obligation to meet the needs of our society for accountancy knowledge. For 10 years I have followed the industry discussion in the UK about regulation and not once has there been any mention that the profession might have such an obligation. Added to this is that ALL the big stories about accounting scandals involve regulated accountants, and I don't see that regulation is going to have any benefits whatsoever beyond further enclosing knowledge which rightfully should be accessible to everyone.

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Replying to ArianBloodwood:
By johnjenkins
15th Feb 2023 10:37

Your scenario applies to most professional bodies. Those that really need stuff are never able to access easily and quickly. The NHS is about the best of the bunch.

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By Courtfield
17th Feb 2023 11:01

The answer to non qualified accountants is quite simple. AML registration with HMRC is already a requirement. Why don't HMRC introduce there own CPD, Professional indemnity requirements etc. as mandatory for AML registration.

They can provide their own CPD courses . Won't be long before AML registration for ACCOUNTANTS

The accountancy profession has lost its reputation because of unqualified accountants? I don't think so. How about the reputation being lost because of the actions of the Big Four Accountants that regularly get fined a pittance compared to their profits for audit failings that lead to collapse of businesses, loss of jobs and livelihoods.

Seems to me that it starts at the top. Accountancy becomes attractive to the unscrupulous only when they see the Big Four 'get away with it'

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Replying to Courtfield:
By Hugo Fair
19th Feb 2023 19:53

Sounds sensible - but for two factors:

1. That means making HMRC judge AND jury (which is never advisable);

2. The killer ... it would make more sense if HMRC staff were first trained to the equivalent standard and had to maintain (on an audited basis) equivalent CPD!

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By Brodders
17th Feb 2023 12:46

Whether you agree with him or not, this is a really excellent, balanced article IMO. Well done Ray

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