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How HMRC manages dishonest tax agents

2nd Jan 2019
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ACCA

World's most forward-thinking professional accountancy body.

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HMRC’s Agent Compliance Team seeks to maintain honesty and integrity at the heart of the accountancy profession.

What is Agent Compliance Team (ACT)?

The HMRC Agent Compliance Team was set up in 2012, to assist and identify risks posed by agents. The definition of a tax agent is quite wide and can be any individual who, in the course of business, assists clients with their tax affairs, directly or indirectly. It may include sole accounting practitioners, business advisers, tax advisers, etc and can be qualified or unqualified.

The main focus of the Agent Compliance Team is on:

  • Working with compliant agents
  • Enabling agents to align with HMRC’s compliance strategy
  • Maximise ‘upstream’ compliance
  • Penalising non-compliant agents
  • Reducing the tax gap

Part 3 of Schedule 38 of Finance Act 2012 confers the powers to acquire the tax agents’ working files in specific circumstances with the approval of a tribunal.

What constitutes dishonest conduct?

Dishonest conduct means a tax agent has done/not done something with a view to cause a loss of tax revenue while assisting or advising a client. For instance, these would be common errors from agents’ interventions for CIS subcontractor clients:

  • Artificial inflation of CIS refunds by inflating deductions
  • Claiming expenses which have already been reimbursed by the main contractor
  • No details of mileage log maintained or claiming home to work travel
  • A standard claim for subsistence and travel without any expenses details
  • Uninformed and unjustifiable claims for use of home as office
  • No consideration to private element of mobile phones cost for its usage
  • Claiming a wife’s wages without any description of her role or PAYE scheme

Businesses are able to claim business expenses if they are incurred ‘wholly and exclusively’ for the business. HMRC has produced guidance for self-employed businesses about what expenses they are able to claim.

An individual who engages in dishonest conduct is liable to a penalty from £5,000 to £50,000. Full details are within the legislation.

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