Requirements of a better system of tax profession regulation accountingweb

How can we regulate the tax profession better?


If tax advisers are to be self-regulated then the profession must first look at what is required to set up an effective system. Dr Peter Sproat outlines the key aspects.

17th Mar 2023
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Following an era of austerity and a series of tax scandals, there has been a sea change in the public attitude towards tax evasion and those who create elaborate tax avoidance schemes that go against the spirit of the law. One aspect of this change is the increased frequency of proposals that demand tax advisers are subjected to additional rules, or even a regime involving an external regulator, as was proposed by Mark Lee recently.

Held to account

The public’s desire to hold those who commit or facilitate tax evasion to account increases after each tax scandal. Accountability is also a major reason people choose members of professional bodies to provide tax advice. Customers believe professionals are unlikely to provide dubious advice because professional bodies insist on standards, and deal with those who breach them. Unfortunately, in practice, promoters of tax avoidance schemes are “almost never members of the professional accountancy bodies” according to HMRC, while we at TaxWatch have found professional bodies can appear slow or reluctant to undertake disciplinary procedures against those who are suspected of breaching their rules.

If the solution is self-regulation by mandated membership of a professional body, as implied recently by Ray McCann, it would be better for the bodies to collectively propose a comprehensive plan for a system of mandatory self-regulation, than wait for a government minister to propose an externally regulated regime and then criticise it.

It is suggested that to be effective a system based on professional bodies would consider the following aspects.

Membership coverage 

Given HMRC suggests more than one in three tax advisers do not belong to a professional body, and almost all promoters of tax avoidance schemes belong to this group, any system of self-regulation that did not require compulsory membership of one of a number of specified professional bodies would be fatally flawed. Making membership compulsory would require government legislation.

Control authorisation

Those authorised to provide tax advice would need to be capable of following both tax laws and professional rules of conduct. Presently, professional bodies tend to assure this by use of entry qualifications and/or a period of experience working in the area. They also insist members hold professional indemnity insurance. Therefore, obtaining agreement on a credible set of minimum standards in these two areas should not be a problem in practice. 

Professional bodies might also wish to propose directors of companies providing tax advice are authorised so that it is easier to make firms accountable for the actions of their employees. They might also like to consider whether tax advisers should complete continuing professional development.

Conduct rules and sanctions 

Professional bodies would have to agree a minimum set of conduct rules and sanctions, if not ethics, to avoid regulatory arbitrage. This too seems a realistic possibility given the existence of the Professional Conduct in Relation to Taxation (PCRT).

Monitoring the rules

A major advantage to professional bodies of mandatory self-regulation would be their ability to decide on their approach to monitoring the rules. It has been suggested that the regulatory and oversight arrangements provided by the Institute of Chartered Accountants in England and Wales (ICAEW) “already meets, and in some areas exceeds, the statutory regulatory requirement found elsewhere in the world”. Evidencing such claims in relation to countries with an external regulator such as Australia, could help persuade outsiders that this form of regulation would be the best option. 

Thoroughness of investigations

Similarly, a joint approach to issues such as a statute of limitations, as well as the thoroughness and speed of investigations would be necessary. A proposal that included enhanced monitoring after an initial assessment of any complaint could help persuade sceptics that charlatans would have difficulty continuing to make money while a professional body undertook a thorough investigation.

Adjudication panel

The sharing of an independent adjudication panel for judging breaches of the shared conduct rules would help avoid the criticism that the application of sanctions differed in practice. The fact the Chartered Institute of Taxation and the Association of Tax Technicians share the Tax Disciplinary Board shows this is not beyond the realm of possibilities.

Cost to advisers

When resisting calls for external regulation, advocates of self-regulation often cite cost – albeit without any real evidence. Indeed, it is impossible to evidence the claim self-regulation would be cheaper without a detailed proposal as to what it, and an externally regulated regime, would look like. Presently, advocates of the latter are likely to suggest the annual cost to each tax adviser of their system would be in the region of $731 (£407.61) before tax, for this is the cost to each tax adviser of regulation by the Tax Practitioners Board in Australia. Professional bodies are advised to keep this in mind when designing a system that looks like it would work as well, or better, in practice.

Over to you

If professional bodies would prefer a system of self-regulated to external regulation, it may be a good idea for them to get together to produce a detailed proposal. 

Hopefully, this piece has provided some food for thought. Please contribute by providing specific suggestions below. 

Replies (22)

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17th Mar 2023 17:50

Rather than increasing the policing of the majority of honest agents who, like me, see ourselves as gatekeepers ensuring our clients pay the correct amount of tax, HMRC could concentrate on the dodgy agents - I am sure they know who those are.
If they don't know then all they need to do is reopen local offices.

Thanks (12)
By Hugo Fair
17th Mar 2023 19:02

Forget the Agents for a minute ... and concentrate on the 2 immutable protagonists: unrepresented taxpayers and HMRC.

The former (even if inclined to 'pay their fair whack' - which is not a universal starting point) are extremely price-sensitive - all the more so since they tend to feel that paying to get their tax returns completed is akin to bring charged an admin fee on top of the penalty (aka the tax) - so anything that adds to those costs drives them back into the optimistic guesswork of DiY.

The latter, although reluctant to admit it, suffer a far greater 'shortfall' in tax collection the further up the food-chain one travels in terms of turnover & profits.

It's not the £1k'ish underpayments (whatever their volume) encountered by the majority of multi-job employees and home-based sole traders that is the problem ... it's those who operate companies based on morally fraudulent precepts (whether that involves data manipulation, bending the rules for various govt sponsored schemes or simply using the 'big boys' to hide things behind smoke & mirrors overseas).

Although I've met some horrendously incompetent (and sometimes downright devious) agents in the unqualified/unregulated sector, I've also met every bit as bad hiding behind the badge of respectability of a PC ... and you only have to read the headlines about KPMG/PWC/et al to see how unreliable a guarantee is evinced by dealing with those of Chartered status.

Of course the vast majority of both types of 'agent' are honest, diligent and over-worked ... but adding to their burdens (and thus to the benighted taxpayer) is to miss the target by a country mile.

Sort out HMRC (resources, skills & technology), and preferably simplify the tax system itself, and you just might find that it all regulates itself ... at least to the point where malfeasance sticks out like a sore thumb.

Thanks (18)
By Catherine Newman
18th Mar 2023 09:16

I recently had an AML visit. I am CIOT. I asked about this and wondered why some PBs require a Practising Certificate and most don't. Sometimes I see people who are looking for Freelancers require Freelancers to have Practising Certificates and wonder why this should be.

It doesn't, however, cover those who are not registered with a PB. I have worded this carefully as you could have passed the exams but chosen not to renew your subscription with a PB.

Thanks (2)
By Postingcomments
18th Mar 2023 10:18

Thanks for the opinion, Peter Sproat, "Tax Crime Fellow" from "TaxWatch" and Northumbria University. Whatever all of that means. I will give your opinion all the credit and weight it deserves.

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Replying to Postingcomments:
By quixoteofthenorth
24th Mar 2023 03:38


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By Ian McTernan CTA
18th Mar 2023 13:31

The last thing we need is more burdens being placed on us, with yet more costs, to try and root out the very very small minority who run these schemes.

Perhaps a better solution would be to imbed a few HMRC staff in the largest firms so they hear about the latest schemes and promoters and can take action.

A lot of people don't want to 'belong' to a professional body as they are perceived as not representing the smaller practice at all, as well as demanding ever increasing fees on top of money for the 'privilege' of AML monitoring (probably the biggest waste of time and money for little to zero benefit).

Rather, they should concentrate on training HMRC to professional standards: have them train for and sit the CIOT exams if they are dealing with taxation.

Thanks (11)
Replying to Ian McTernan CTA:
By Mr J Andrews
20th Mar 2023 13:26

Well said . Replace the article with these comments as a proper grounding if the issue should be pursued.

Thanks (3)
By 2TunTed
20th Mar 2023 10:13

I am not convinced that regulation will achieve anything until those who are currently completely unregulated are brought into a regulated regime and that the regulated regime that they are brought into at least matches that currently in place with the various professional bodies regulating the activities of their members.
There will always be the saloon bar advisors, causing a lot of low level nonsense, who are never picked up and tax payers who simply tell lies about their tax affairs and presumably everything else. I am sure that we would all like to see more effort from HMRC ensuring proper compliance before bringing in regulation which, as matters stand, will only really benefit jobsworths, clipboard manufacturers and purveyors of red pens.

Thanks (3)
paddle steamer
20th Mar 2023 10:25

The interesting take might be to ask how many of those currently peddling such schemes who are currently not members of professional bodies were originally members of such professional bodies, I suspect most?

I strongly suspect that few who have never been either an Advocate/Barrister, Solicitor, Accountant with one of the main bodies or a CTA peddle/market any schemes.

The issue accordingly is really not one of regulated/non regulated, I for instance , never having achieved ICAS qualification, am obviously not knowledgeable enough about tax to even devise any tax schemes.

In fact I might put forward "A Modest Proposal" that those who are QBE are the least likely to market perceived abusive schemes and accordingly the profession and the Exchequer would be better safeguarded if nobody was qualified.

Thanks (6)
Replying to DJKL:
By quixoteofthenorth
24th Mar 2023 03:52

DJKL - Spot on. Your first paragraph is very salient. In the same way as the saying 'follow the money,' perhaps it may be enlightening to look beyond Mr Sproat's article and examine the original source of the notion.

Mischief making, or potential self-promotion?

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By norstar
20th Mar 2023 10:44

Part of the problem IMO is poor targeting by the professional bodies.

In the past 17 years I've had nine visits from my beloved ACCA covering; monitoring, AML, CPD, approved employer, audit etc. I've had four since 2018, all satisfactory.

My local rival a few doors away has seen them once in 23 years - a failed AML visit last year being the first since a failed monitoring visit in 2020.

I recall from my auditing days that we planned more detailed procedures for higher risk areas, so I'm wondering why the ACCA don't seem to and instead, continuously check compliant firms.

Also as a point of interest, several of our previous staff who were found to be not up to the job, left to set up as unregulated businesses.

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By JackH
20th Mar 2023 10:47

I joined the profession in 1969 and retired in 2019, not because I was past it but on account of the cost of PI cover, AML overkill, and a growing apptite for interfering regulation by my 3 professional bodies. I saw my role as knowing the answers to clients' questions after reformulating them so that both were right.

I did not see it as my role to police their morality as dictated by the Great and Good. Legislation to charge tax should not be invested with some spurious social engineering dimension. The Government can propose any kind of tax charge it wishes and its fundamental role is to get its tax legislation right. If it wants to tax oranges it should not blackguard those who invest in apples; and certainly not, with HMRC and the "tax avoidance is a sin" brigade, say that apples are caught because they are "all just fruit", so apple owners are just wicked enemies of the people.

Of course those who are minded to embark upon tax avoidance must be advised of the possible reputational repercussions. as these holier than thou pundits are de facto part of the risk assessment. In fact I spent most of my time advising on the least worst choice of route and the unexpected terrifying consequences of bad legislation (see the two Lobler cases in the FTT and UT).

In my view professional bodies are far too sycophantic and pusillanimous in their relationship with the Government, as the moralistic PRCT's tax planning section and the SRA's fatwa about SDLT demonstrate. Hence my decision in 2019 to immediately and joyously terminate my membership of all my 3 craven sanctimonious regulators, ICAEW CIOT and SRA.

Such bodies can and should protect clients from bad advisers but it is not their function to dictate what advice clients should seek from and be given by good advisers in order to cosy up to the Illuminati. The idea that HMG or HMRC should regulate good advisers (and decide who are and are not such) is as ludicrous as Uti-Puti supervising human rights and war crimes.

Thanks (4)
By Mr J Andrews
20th Mar 2023 13:24

Here we go again . If it's not about plugging useless MTD software , someone has to write about ''regulating the profession'', opening with the classic 'IF'. { No slur to Rudyard Kipling }.
Clearly the article spells out more time , administration - and costs . And no doubt a new Quango enjoying the financial - and other -benefits of playing God. But for what ? Does anyone believe a so called ''effective system'' will wipe out the rogues within the profession.
One line in this article sticks out............PROMOTERS OF TAX AVOIDANCE SCHEMES ARE ALMOST NEVER MEMBERS OF THE PROFESSIONAL ACCOUNTANCY BODIES. But this ALMOST rhetoric is ACCORDING TO HMRC and we all know what HMRC statistics mean. I would suggest the ALMOST goes the other way and which reaffirms - what's the bloody point ?
Ian McTernan has succinctly summarised what is needed.One further point should be input by HMRC into resurrecting their practice [ when tax offices with District Inspectors existed ] of keeping little black books of the rogues on their patch. It's not just avoidance shemes which need looking at.
I confess to not having heard of the author's professional title beforehand but I write as a decent fellow AGAINST crime as far as tax is concerned and a fan of BBC's ''Springwatch''.

Thanks (2)
Replying to Mr J Andrews:
By quixoteofthenorth
24th Mar 2023 04:00

Mr J Andrews. Very good. Your first paragraph - I have already commented on the original source of it being either mischief-making or self promotion.

Your penultimate paragraph - excellent, and many would agree with you.

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By The R and D Community
20th Mar 2023 13:33

The R&D tax relief industry has definitely had more than its fair share of issues, and as yet, there doesn't seem to be a particularly neat solution.

In our view, the problem within the R&D scheme needs to be addressed by more positive means. We believe that most people working in the area want to improve and excel - it's just that there's historically been very little training and support for people working in this very niche area.

Our hope is that a solution to low standards is going to be a blend of Government-led compliance initiatives combined with the industry coming together voluntarily around a shared set of values and knowledge.

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By justsotax
20th Mar 2023 14:52

Disappointing to see such an unbalanced and naive (almost wet behind the ears) approach to the current issues of tax evasion.....almost as if the 'tax crime fellow' has never worked at a small firm or within a one man band where making mistakes/technical errors (in client and revenue favour) are the high risk issues compared to creating some elaborate scheme to evade tax.

This is only shamefully trumped by the Revenues inability to target fraudulent businesses leaching the system for personal gain through repayment claims made by the thousand from singular businesses and elaborate schemes supported by high profile barristers and big four firms....

Dr, Carpet bombing the tax profession will only isolate those previously onboard to push the for the big boys.....they will continue as they they will employee people, and their money to 'deal' with this type of approach......

Thanks (4)
Mark Lee headshot 2023
By Mark Lee
20th Mar 2023 19:10

Thanks for this contribution to the debate Peter. The proposal of mine to which you refer at the start of your article was part of an interview with Rebecca Cave. My replies to her questions were based on my comments in a much more detailed article I had written for Taxation magazine. In it I examined the background to the desire for more regulation, the objectives to be achieved and, in my view, the only logical options (which I repeated in my interview with Rebecca). I can supply the original Taxation article if it's of interest.

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Replying to bookmarklee:
21st Mar 2023 09:09

Unfortunately, like so many replies the idea of additional institute compliance, rules and controls will not have a material affect on reducing fraud, malfeasance and negligence and reducing the absolute level of tax revenues.

The idea of putting professional bodies in charge of additional compliance is like putting Dracula in charge of the blood bank.

Lets cut to the chase statistically there is no absolute way in reducing tax evasion to nil. Whether in a professional body or outside does not guarantee that practitioners will not create, collude or commit fraud.

The empirical evidence of poor audit by the largest professional bodies is strewn with horrendous cases.

I only need mention Carrillion and Enron. The amounts involved are enormous the cover ups by the accounting firms disgraceful, using a lorenz curve it would be far more sensible to make accountable all the individual partners of the accountancy firms. And not to hide behind the LLP or out of cout behind closed door settlements.

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Replying to bookmarklee:
By ArianBloodwood
21st Mar 2023 15:20

Yes please, I'd appreciate reading the whole article.

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Guest speaker Brian Wright
By Brian Wright
21st Mar 2023 15:03

Firstly, it is not helpful to have an article that includes both Tax Evasion and Tax Avoidance. They are not the same and should not be considered within the same discussion.

Secondly, and perhaps I am naïve, the majority of taxpayers pay the tax they are due without question - even where they don't think it is fair (I tell them tax will never be fair!).

Thirdly, the tax administration is biased towards HMRC and I see and hear about a fair share of abuses by HMRC.

Perhaps if we held everyone to account, including HMRC, we might see some change across the board.

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Guest speaker Brian Wright
By Brian Wright
21st Mar 2023 15:03

Firstly, it is not helpful to have an article that includes both Tax Evasion and Tax Avoidance. They are not the same and should not be considered within the same discussion.

Secondly, and perhaps I am naïve, the majority of taxpayers pay the tax they are due without question - even where they don't think it is fair (I tell them tax will never be fair!).

Thirdly, the tax administration is biased towards HMRC and I see and hear about a fair share of abuses by HMRC.

Perhaps if we held everyone to account, including HMRC, we might see some change across the board.

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Ray McCann
By Ray McCann
22nd Mar 2023 21:31

I agree!

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