Unregulated tax agents have created an “extraordinarily unfair” environment that breeds practitioners who are “probably not as concerned with PCRT rules”, argues accountancy's professional bodies in a new research paper.
The longstanding debate around unregulated tax agent and supervision became the focal point of new research from HMRC, which explored the role of professional bodies, and “excessive” regulation for small practices.
In HMRC's research, senior officials from 15 professional bodies of a variety of sizes felt that the system of self-regulation of professional bodies was working well, but the conversation naturally turned to bringing agents who are not members of professional bodies under some form of supervision.
Concern about non-members
Some professional bodies thought that by sweeping the unregulated into some sort of supervision you’d get a better overall standard. This concern is supported by the report’s findings that only 67% of tax agents are members of professional bodies and follow standards such as Professional Conduct in Relation to Taxation (PCRT).
Some of the professional bodies pointed out that non-members don't have the same level of expenses or CPD requirements.
“It is, you know, extraordinarily unfair," said one senior official in the report. "We’ve been looking for years and years for something to be done to level up the playing field and to create a quality tax profession.”
And one professional body official believed practitioners might not want to be supervised because of a “rebellious streak” or because they wanted to “stay under the radar” – perhaps due to a previous disciplinary.
Although the professional bodies accepted that the remaining 33% are not necessarily “bad tax agent[s] or a bad accountant[s]” because they are not a member of a professional body, recognising that these practitioners may have learned their skills in a private firm or are ex-HMRC staff.
Regulating the unregulated
While the professional bodies didn’t agree with a “one size fits all” approach to regulating tax agents due to the diverse nature of the profession, there were still calls for at least some “proper assessment... of agents operating outside the system”.
However, there was no clear consensus on how to achieve this. A couple of professional bodies suggested mandating that anyone providing tax services should be a member of a specified group of bodies and others felt tax advice should be a “closed shop” for members of a professional body.
The underlying problem, several suggested, was that being an accountant is not a protected term in the UK, and what is needed is a legally protected title to distinguish a qualified advisor from somebody who wasn’t.
The research report also explored the professional bodies’ relationship with HMRC, in which some described a sense of mistrust driven in part by smaller agents being blamed for the £9bn tax gap. “It might be right that they are blaming it on [agents], but it seems quite a nebulous way of doing things for me to blame it on them and then say, ‘Right, we need you do work with [us on] making tax digital’,” remarked one interviewee.
The impact of greater supervision became a bone of contention for the smaller professional bodies. “[Agents] are supervised and regulated to the point where it is having an adverse effect on them running their business,” noted one senior officer from a small professional body about the raft of regulations including AML and GDPR.
Confirming a criticism flagged in the recent OPBAS report, one senior officer from a small professional body feared that as a result of ramping up regulation, some members could resign their membership and continue to practice without the safeguards of supervision.
“‘It doesn't take a genius to sort of think... I pay £200 a year subscription to you, I already pay you £130 to be supervised by Money Laundering, you're now asking me for another £100 [to be supervised by OPBAS]. You know what, I'm just going to resign my membership and then you've lost somebody who does have to comply with PII, CPD and money laundering, just to go off into the ether.”
The role of professional bodies
Elsewhere, some professional bodies expressed concern about how the advent of the Office of Professional Body Anti-Money Laundering Supervision (OPBAS) has created a two-tier regulatory system and that HMRC is not included in this AML supervision.
With the aim of understanding the role of professional bodies, HMRC discovered common aspects in all 15 participating in the research. The professional bodies all spoke about how they represent members’ interests, protect the public, upheld professional standards through codes of conduct and ethics, as well as enhancing member’s professional knowledge.
There was also a discussion on how they adhere to professional standards. Nine out of ten professional bodies conduct practice reviews on a routine or risk basis of 5%-8% of their practice members per year.
The professional bodies also discussed the role of the disciplinary process and its publication in the local press plays as a deterrent. But again, the professional bodies raised concern that these sanctioned members could still operate without being a member of a professional body.
About Richard Hattersley
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