Are all accountants created equal?

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A summary and update on the issue members are calling the great unqualified debate.

An HMRC consultation document published in April, entitled Working with Tax Agents provoked a lively debate among members on both what HMRC should do about agents who act incompetently or fraudulently, and the issues surrounding unqualified accountants. With this article we will try to capture some of this debate, as well as bringing in views from professional bodies.

Origins of the debate

The HMRC consultation document sought to gather the views of the body of tax agents about how agents who act incompetently or deliberately perpetrate tax fraud should be dealt with.

The original post on this t...

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21st May 2009 10:47

The Revenue Power
In answer to Julian's points, HMRC does not really have specific power to stop agents handling client cash or dealing with accounts and returns. HMRC can refuse to issue a repayment to an agent but that will be in specific circumstances and the numbers will be relatively small. It would be possible to make it awkward for incompetent of neglectful agents by taking up a lot of returns for investigation but, remember, there is a client on the end of that and there still needs to be some justification to do that wholesale, It would be labour intensive with no guarantee of a return. It is better to have an in depth look at a selection of the work of a practice and by that I mean intrusively reviewing working papers and correspondence files. Powers are needed to do this but suspected fraud needs to be handled under the criminal code.

The original proposed strengthening of Section 20A TMA 1970 (commonly known as motion 241) was designed to deal with this (criminal cases excepted) but was vigorously fought against by the profession and did not get through. I wonder why. But this was some 20 years ago and was quite a mild amendment compared to what might be appropriate today. Computerisation for example has moved on a pace since then with all the other portable gadgetry that exists as well.

I am not sure that HMRC is so well organised these days to have a black list of agents in the sense that you mean it. The old Enquiry Branch was perhaps the best medium for this but in today's world of centralisation of "compliance" into regional centres and emphasis on results, I suspect there is very little done.

In practice this would only just scratch the surface and does not address the issues I put. The matter of unqualified agents is a bit of a diversion in some ways. I doubt that there is a large amount of tax lost in this area but that is not to say that nothing should to be done; Julian has got the message that the clever, qualified agents are more likely to be the biggest area of biggest risk.

Having had much experience of this area you might get the impression that I am cynical and prejudiced against qualified agents. I have found the vast majority of agents to be honorable with very good standards of work. But complaceny does set in and it is sad to say that there are those that do merit a lot of attention. A defensive approach to this by the profession cannot continue to be justified. The two issues set out by me need to be addressed.

Dennis Parrett CBE

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By Jobtel
20th May 2009 18:57

Rather Surprised
I had always imagined that there was some sort of a "black list" of accountants or agents who either deliberately or accidentally produced to the Revenue poor quality work. Of course there must be such a list as I understand the Revenue will refuse to allow the agent to handle client cash if there has been a "problem" in the past.

I understood that any practitioner who provided substandard work probably incurred more investigations than others. Indeed when helping to sell practice buyers have frequently made the point that they had had no detailed investigations in any clients for years and they thought it was because of the high standard of work they carried out

It would therefore seem probable that The Revenue already knows the answer and its probably that unqualified accountants may present a higher risk of poorer quality work but as the value of their fees is not high they probably present less of a mess for the Revenue than cleverer well qualified accountants who land on obscure bits of tax legislation to cut the tax that their clients really ought to pay.

Julian Hamilton - Jobtel Practice Merger Brokers

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20th May 2009 14:32

HMRC action re Accountants
I offer some further and final thoughts to bring things back to possible action that might be needed.

People can complete their own Self Assessment Tax Return. It is a matter for them who they employ to assist in whatever way is desirable. Assistance with Returns could be driven undergound. I realise accounts are not just for tax purposes. Cost is important to the small business man. A lot of small traders seek the cheapest way of getting help and a qualified person will not necessarily be good value for money for a small business.

Often many small qualified practitioners are trying to make a practice as profitable as possible. I have seen cases where the work is done by an unqualified person, often paid a pittance and without any real, meaningful supervision. In talking about qualified v unqualified, one needs to look a lot further than just the face of any practice. Perhaps the profession could tighten up on this one.

Apart from auditing, there is little if any supervision by the Institutes. Even with auditing, monitoring does not give the assurances that are needed.

Many MP’s are highly qualified people, often with lots of business experience but qualifications do not prevent poor work, bad judgement, lack of supervision or fraud. This is a first class example of how we should not rely on even Parliament without adequate supervision.. Perhaps the public have been made more aware of this over the last few weeks and strict controls will be imposed.

To remind everybody of one of the original questions posed by HMRC, namely what should HMRC do about fraudulent or incompetent accountants? There is nothing new in this; it has been around for years and little is done. The answer seems obvious. It is the responsibility of HMRC to sort this out where it involves loss of tax. HMRC should therefore be supported and given suitable and intrusive powers to deal with a practice where fraud is suspected. Why would the profession not support this especially in the current climate?

HMRC should also be given clear powers to review a practice where it is suspected that neglect or incompetence is leading to a loss of tax. Findings should be publicised where irregularities are established; perhaps through the Institutes where a qualified person is involved, giving an opportunity to review matters and improve or impose supervision of practices. The profession surely must support this and it cannot continue to dodge around this? Alternative approaches usually mean nothing more than a talking shop with no action to address the real problems.

Be careful! One day strict controls might be imposed on you as well in a way where your influence may become non existent. Just for the record I have no direct insight into any of this from the HMRC side and I do not represent their views.

Dennis Parrett CBE

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20th May 2009 13:04

How about this?
There's just been a question posted on Any Answers that I think is relevant to this, ie a "qualified" person who by his or her own admission is not "qualified" to do the work.

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19th May 2009 09:33

Hit the nail on the head
Richard, I quite agree with you, and thats the barrier I come up against.

Our practise actively deals with clients tax planning on a regular basis, along with the longer term planning revolving around increased efficiencies and reduced costs through management accouting, and the tax implications of this. Companies are restructured, overseas tax is also considered, remuneration timings, use of LLPs, and a huge array of more simpler but very time sensative actions are utilized.

I know alot of accountants do this kind of pro-active work, but I know a lot who do not, and its all about fees and getting the year end compliancy out the way.

And thats the crux of it. I came into tax late, from management accounting and realised you cant have one without the other, so we work hard to get the client thinking about all the business processes, being costing, tax, cash management, use of sub-contractors, use of overseas companies etc etc.

Yesterday I went to a CIOT course on CIS and afterwards chatted to a couple of members, including one who was ATT qualified. When I explained that I was having an AAT compliancy and practise assurance audit this week - both exclaimed they had never had one. Their CPD requirments were attendence, not as AAT wish to see - a breakdown of relevance and application in the workplace. If I fail to produce the goods this week, there may be disciplinery, I may loose my licence, and I will have to reapply.

And many qualified many years ago, and state they have little time to keep up to date with legislation. Our practise has taxation magazines littered around everywhere [ excellent reading by the way] and utilizes on-line subscriptions for property/ and international tax.

And this is where it really gets me - now the PCG do stirling work, but as a non-qualified I am unable to utilise their IR35 training, even though I actively review all new clients who I feel may be affected by this legislation, to the PCG Group. I have actually had to do the computations for IR35 and plan for this with bankers and dealers, on behalf of qualified accountants, as a sub-contracted technician, because they do not understand how it all works!!! Even at the CIS meeting, I was concerned that some practitioners were getting confused by IR35 and CIS, or employee and worker in the light of employment law.

In conclusion it has been very refreshing on this forum to hear some half way point being seen as the best solution. In fact it may even be a good idea to badge the profession more precisely and let the public know what they are getting for their money. But I am wary that as Richard says a lot of the service is admin based and clients may be unaware they could be getting a whole lot more from another source.

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18th May 2009 10:46

The problem I have with the "unqualified" debate is that certain Institutes abrogate themselves the right to ONLY call THEIR members qualified with the rest irrespective, of studies undertaken, subject to rules and governance being viewed as "unqualified".

This debate is undertaken in other countries where similarly a single Institute tries to have the use of the term legislated as only applicable to them. All of course "in the public interest". Yeah whatever.

I do believe the word "accountant" is often misused but if we are trying to protect the name (and lets be honest its about the money!) then it should be inclusive not exclusive. Any person who has done academic study should be allowed to call themselves accountants and if in public practice then to be registered with any accounting body, worldwide, which is recognised. Recognition not being dependent on the power of any Institute in any country.

Many a way to skin a cat without abrogating the term to only one body.

Is one qualified to act as tax consultant with an accounting qualificatio? I have my reservation but lets be clear, 90% of tax work is administration and compliance and only 10% real advise with some notable Big 6 accounting firms being very active in tax avoidance, so much hated by our spendaholic Governments and averous tax authorities.

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By Anonymous
17th May 2009 17:50

Attitude or certification?
Part 2 -

For me, being an accountant is as much about the soft skills we should develop as much as it is about the profession and certification. Having a knowedge of business, markets, applications (Lotus, Excel, Access, etc), how to build relationships and understanding how an accounting system works are just the tip of the iceberg when it comes to soft skills required. Given the manor and pace of the changing business environment and the expectaions being placed upon accountants to advise a business through it as a result, we should be more than number crunchers, report providers or managers of accounting systems.

Problems of any nature go hand in hand with an incorrect aproach at the beginning of the project, task, debate, etc. This debate being yet another example of an incorrect first principle approach: "You cannot provide legal advice without being suitably qualified, so why not tax and accountancy advice? Let us bring standards up by this measure. It also provides the public with an assurance there is someone they can complain to that can really do something about their advisor”. This very statement is flawed, in that it presumes that all legal advisors are of a suitable competence and skill to do their job. Most of us have come across contracts or some other legal document that was so badly constructed, it was a wonder a signature ever made it on to the document.

The debate would have have been better served if it had begun with a reflective statement, rather than a comparative one.

I am proud of the fact that I will be qualified at some point soon, but this does not mean I should become pompous, arrogant and closed to the fact that I will still not know it all: the fact we all take part in some form of CPD highlights the 'continual learning' approach we should all bear in mind, especially when it comes to how we perform in our roles and our capabilities. Does one ever know enough and will there ever be a time when one will not require the skill of another?

Rather than the profession looking at the qualified status being the only status that matters, it would better serve its overall objective of improving the profession by including what Judith terms "beyond their remit" and what Dennis terms "expertise, ability, tenaciousness and professionalism": this debate points to the fact that whatever the percieved status and asscoiated code of conduct a professional body has in place currently, it is not enough.

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By Anonymous
17th May 2009 17:49

Attitude or certification?
In two parts: part 1 -

I am in agreement with the HMRC in such that it does not matter if a person is qualified when it comes to providing sound advice and applying good business judgement. From my point of view experience, attitutde and understanding ones own capabilities count for far more than any qualification, even if I do agree that the qualification is something that we should all achieve as aspiring accountants setting an acceptable mimimum requirement standard.

I am currently studying. Over the course of my career I have had to clean up many-a-mess that 'qualified' accountants have left behind. In some cases this has meant assisting a company through a turn-around situation, after having first identified it upon my arrival. In others it has meant advising them out of bankruptcy, or simply cleaning up the accounts in order to produce financial statements for the year. In all cases however, the one thing that has rung true is that even where there were examples of exemplary work, there were also examples of the previous 'qualified' accountant being out of their depth in certain areas, and rather than seek advice from an appropriate person outside of the organisation (or even wirthin), they plough on ahead and cause problems that can put a company out of business and most of all, employees out of jobs.

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16th May 2009 15:57

Arrogance? But is that the word? I claim expertise, ability, tenaciousness and professionalism and I gave that to clients in private practice. Much of my time included working with Chartered Accountants as their line manager, and in charge of a number of civil and criminal investigation teams. We must have learned something from each other.

Much time included the investigation of serious irregularities by qualified professionals and one does not need to be too expertly trained in accountancy or tax to recognise fraud or to consult a Revenue manual or GAAP too often.

Just before retirement, I was in charge of many raids around the country over a week, leading to one sentence of 14 years and 4 for a barrister in a massive and organised fraud involving millions. And I would never have held back in serious Revenue internal problems; I led for the Revenue in the investigation of an internal corruption case some years ago which took 5 years of my time in unpleasant circumstances resulting in 5 years for a senior manager and consequences for others.

Things go go wrong in the Revenue but it was usually stepped on quickly whatever the consequences because of the expertise that existed to deal with it..

Checks and balances, regulation, and monitoring are not foolproof; the professional world does not always acknowlege that. The worst excesses from a public perception seem to be in Westminster. The rules (involving terminology like wholly, necessarily and exclusively) cannot have allowed for things that are being disclosed and it would be a national disgrace if criminal investigation was not to happen.

Powers are needed to investigate matters where regulation and monitoring does not cope. The professional bodies are not there to investigate fraud.

On the matters I commented upon, I do claim an expert knowledge far in excess of the average practitioner and probably of the average current Inspector. In respect of HMRC manuals, they are often extremely useful as a tool to get the upper hand to the benefit of a client when one is thoroughly familiar with finding a way through them.

I never claimed expertise in putting together accounts or indeed commenting on the technicalities of accountancy when it was not my field. I always preferred to leave it to those who I employed and who enjoyed that kind of work to advise me. But then I was used to having professional relationships with qualified accountants who usually knew what they were doing. But I expected them to acknowledge my expertise.

Dennis Parrett CBE

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16th May 2009 00:12

Accountants unqualified for tax
The accounting profession may wish to protect the term accountant, but I know and include myself amoungst a group of very client focused professionals who constantly have to put right the failings of the qualified. In fact many qualified accountants never get taken to task by their professional bodies, as clients just want to walk away from a bad job, and pass it to someone more competant - if the profession is so highly regulated, how come these professionals mess up!

Ex-HMRC, tax qualified, technicians who have experience upto Financial Controller levels in industry etc, and other business professionals provide stirling work every day, and I am just sick to death with the pompous attitude of the qualified!

Many of my clients come from ex-chartered accountants- for 8 years I have been picking up the rubbish reporting/ late filing issues/ bad remuneration planning/ missed capital allowances/ illegal dividends / ESC16 mismanaged / and generic accounts susage-factoried through many practises to name a few. And I would ask what are many accountants doing dealing with tax anyway, when they are not tax qualified. I know you have tax modules within your training, but its no where near the levels required for CIOT. Lets get really precise about who does what!

Worry less about your titles and more about helping your clients businesses and helping them remain HMRC compliant. I know qualified who pride themselves on never seeing clients. I get my hands dirty and work on-site, sorting tax, statutory reporting, IT systems, costing for engineering/manufacturing systems, IR35, agency rules, employment contracts, VAT problems re Intrastat/triangulation rules/ Sage training/ stock control systems etc, etc, after 25 years working in industry/finance. Local accounting firms make me sick with their attitude. In industry there are many financial controllers who are not qualified and have to deal with the hard graft of day to day accounting, with far less pay and far more agro. I should know.

I do agree that anyone wishing to be taken seriously in this profession, should be part of a professional body, should regard CPD as imperative, should pass on work that is beyond their remit and should strive towards qualifications. But once you have them, it doesnt mean your better than the next man/woman - its about how you use and improve on that qualification that matters/ not that it gives you a god given right to arrogance!!

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15th May 2009 17:05

Accountancy Standards
As a former Enquiry Branch Investigator and Group Leader, and Deputy Director of Special Compliance Office, I had significant experience of the performance of Accountants both qualified and unqualified. I had two spells in charge of the SCO Accountants.

Regulation, monitoring and exchanges with the profession only scratch the surface; look at other areas of finance. Regulation will not combat the fraud and malpractice that I have seen in the past. Lax practices lead to things going wrong as seen in Westminster.

Although retired over 10 years, I spent time in private practice; now ceased. I specialised in investigation cases, usually from other firms of qualified accountants. I was not attracted to drawing up significant business accounts (I prefer tearing them apart with the help of working papers) but was competent to deal with most other issue. Choosing between qualified and unqualified is often down to the higher level of fees and that is something that needs to be considered by those pushing the qualified route.

One cannot be dogmatic but, generally speaking, the main issues of Revenue concerns are often with qualified accountants because unqualified people usually do not deal with larger accounts. Private practice has not changed my view.

My 20 years in SCO (and its predecessor) involved both criminal and civil action against accountants. I cannot recall a significant case of an unqualified individual. I would be surprised if the Inland Revenue raid powers of the past (Section 20C TMA 1970) have been used against many unqualified accountants but certainly I recall a number of qualified accountants.

The unqualified person usually suffered a visit to put things right and discuss options. I will go no further. But how much of that happens now?

At some stage in the past the Revenue tried to strengthen Section 20A TMA 1970 to make it easier to deal with those cases that were not in the S20C category. However attempts failed through pressure from the profession for reasons best known to them. But many thought it to be a very necessary measure and I am certain that things have not changed.

Does HMRC consider the current criminal powers sufficient to cope with the criminal investigation of accountants and other professionals, or did no one argue the case at the time? Section 20C, authorised by a circuit judge, was effective to combat the kinds of frauds discovered in an accountancy practice. They might be struggling. Is there much activity in that direction as criminal work seems to be dominated by VAT and more straightforward cases with all the attendant difficulties of the different cultures that still exist. The largely soft targets and admittedly lucrative pickings of offshore account cases are attracting attention. However what is left untouched? I am very pleased that I retired before formal merger reared it head.

Dennis F Parrett CBE

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By Anonymous
15th May 2009 16:36

Are we unqualified?
Myself and my partner run a small practice. Our background is that we are both ex HMIT's.
On leaving the Inland Revenuewe we both went into private practice with large/medium firms. We were both tax managers at local offices of our respective firms dealing with complex tax and accounts issues and investigations, as they were then called. There was no pressure to sit exams and neither of us did.
We decided to go our own way in 1993 and by that time had accumulated about 20 years experience each.
We have no qualifications that would be recognised by the "big 6" bodies but we:
1) have all appropriate insurances,
2) Are members of a training organisation through which we do our CPD,
3) Abide by a practice manual compiled by this organisation in conjunction with the ACCA (suitably tempered for a small practice),
4) Abide by money laundering regulations and all of the other rregulations that would be expected.
We joined a small business group and as a member of their national tax committee my partner has been directly involved in the consultation process over the new penalty regime etc, whilst I have been sitting on the local working together group.
Are we unqualified - I dont think so! HMRC steer away from this term and use unrepresented.
I have no wish to enter any argument about capabilities - if you are good enough you will get clients and keep them - but one interesting bit of feedback from the consultations is that in some cases representatives from bodies within the "big 6" were so out of touch with what goes on at the coal face that their contributions were all but ignored.
Hey ho!

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15th May 2009 14:54

I despair
Robert beat me to it and I'm glad as his comments are far more measured than mine would have been.

I am lost as to why we need to go over this stuff so often, wasn't the last thread enough for you? Or is it that your servers can't handle over 108 comments? The 2 Rebeccas had to jump in to stop the flaring that was taking place and that brought the whoe debate to the level of a primary school playground. Then you go and do it again and worse, you maintain the mix up of consultation document with Q V UQ, the main reason for the mess left in the last thread.

Given the irresponsibility of the posting that started the last one and the title of the email I got announcing this one, all I can see is tabloid methods to fill pages with "angry of cyberspace".

You attempted to bring some fresh air to "the debate" by seeking the views of the professional bodies, what on earth did you expect them to say? It's like asking the Vatican if someone needs to have religion to be Pope!

I've made my contribution to the debate over Q V UQ on at least a dozen threads in the past 2 years and, in particular after Vince Cable was convinced that bringing up the protection of "Accountant" was a worthhile exercise for an Early Day Motion (Motion...yep). I also bust a gut in the last thread trying to "debate" the Con Doc.

I'm off to do some work.

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15th May 2009 14:24

Competency and qualifications
I agree absolutely with Robert Henry`s comments. I left the Inland Revenue 16 years ago with no formal accountancy qualifications and now have a full accountancy practice. In that time some of my most lucrative jobs have been correcting errors made by `Qualified` accountants. I have no doubt whatsoever that there is no connection between qualifications and competency.
Furthermore, I am still asked by both Certified and Chartered accountants to assist in tax matters where they get out of their depth. If their qualifications are so complete then they clearly would have no cause for my services.

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By petra31
15th May 2009 14:05

Regulation and competence
I agree with the need for regulation for unqualified accountants and tax advisers but the debate must keep separate the issues of regulation and competence.

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15th May 2009 13:31

Are all accountants created equal?
I have over 30 years experience offering advice to clients on tax, business and accountancy issues and during this time I have NEVER had the standard of my advice or the quality of my work questioned by HMRC or by any client.

Over the years I have worked as payroll clerk, bookkeeper, credit controller, financial controller, financial director, company secretary, systems analyst, audit senior, management consultant, tax technician and business advisor. I spend roughly 1/3rd of my time in study and research to ensure that I am in a position to offer my clients the best service I can. On the few occasions when specific expert advice is required we, the client & I, get that expertise from suitable sources.

How dare it be suggested that I am unfit for purpose!

I offer a cost effective service to a wide cross section of people, many of whom could not afford the same quality of service, expertise and attention to detail from any other source.

I have lost count of the times when I have had to correct errors made by a "qualified" accountant. As an example I to totally re-do two 2007/08 tax returns where the property pages included legal fees/stamp duty etc on property purchase under prof fees. Mortgage int claimed was incorrect, capital improvements included in repairs and expenses incurred after date claimed in error. Bank int & divis were incorrect. The only correct figures were taken from a P60.

So although the "qualified" accountant's name was on the letterhead I can guess that no one with more than a few months of experience were involved in providing this client with this service. The cost of this service - £681.50.

I understand the principle of having an institute to complain to - but I doubt whether the client would get any recompense for the time, effort and costs involved - the previous accountant's response " the client signed the tax return as correct!"

As has been said before - the term Chartered, Certified etc, and the letters after one's name is proof enough of an accountant's academic qualification and that they are accountable to a governing body.

However do not take away the client's choice or my right to work.

I disagree with ICAEW statement that "it’s a false economy to not use the services of a qualified accountant..” I have plenty of evidence that this is complete nonsense, including a corporation tax refund of £9200 recently obtained because a firm of "qualified" accountants had consistantly got it wrong over several years.

It’s a false economy to pay for a service you do not get or do not need and I urge all small businesses to choose a firm based on performance and reputation not just because of the academic qualification of someone on it's letterhead.

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