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CIOT: All tax advisers should be qualified

The government is proposing a new regulator of tax advisers or a requirement that advisers should all be members of a recognised professional body. The CIOT prefer the latter approach but the transition needs to be handled carefully.

28th Aug 2020
Tax Writer Taxwriter Ltd
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These proposals are included in HMRC’s call for evidence on raising standards in the tax advice market which attempts to address a range of problems across the tax market, from promoters of egregious tax avoidance, to advisers who simply provide bad value to their clients through poor service standards.

The CIOT has responded in depth to the government’s paper with three main conclusions: 

  1. The problem of the remaining recalcitrant tax scheme promoters needs a specific solution and is not dependent on whether tax ‘advice’ is being provided.
  2. There needs to be consistency of professional standards (including training, professional indemnity insurance and standards of redress) across the whole tax market and not just applied to those who are currently members of professional bodies.
  3. Hidden tax advice embedded in tax compliance software, such as for MTD, needs to be brought within the scope of regulation.

Rebecca Cave asks CIOT tax policy director John Cullinane about the second conclusion: that professional standards should be imposed consistently across the tax market. 

Q: Are most of the behavioural problems encountered in the tax advice market caused by advisers who are not members of a professional body?

We understand from HMRC that advisers who are not by members of professional bodies represent 30% per cent of tax agents, but those advisers are responsible for most of the behavioural issues HMRC encounter.

Q: If 30% of tax agents are not affiliated to a professional body. How many individual tax advisers does this percentage represent? 

We know very little about the population of advisers outside professional bodies. HMRC holds the most comprehensive data set on tax agents. It would be immensely helpful to public debate on this topic if as much of the data as possible, subject to legal constraints, was published. 

Q: In 2014 an HMRC report: Tax Agent Segmentation Research - Exploring agents’ digital needs and attitudes estimated there were 43,000 paid agent firms in the UK, so 30% would be at least 13,000 individuals and possibly many more. How would you bring all these advisers into the professional bodies?  

There is the risk of excessive disruption to the tax system if all agents and advisers who are not members of a recognised professional body are prevented from working in tax overnight. We suggest a transitional period to allow existing unaffiliated tax agents to adapt. 

An early requirement might be for all tax advisers to have professional indemnity insurance – as professional body members already do – which seems a very basic level of protection for the customer.

Q: What about people who can’t afford to pay a qualified tax adviser? 

Significant numbers of people are not used to using tax advisers on a paid basis and indeed do not have large incomes, but are nevertheless are too high-earning to be eligible for help from the tax charities. Although this is not a problem of unprofessional behaviour, it is a problem in the market and needs to be considered in designing solutions.

Q: Will the requirement to use qualified tax advisers push people to seek advice from offshore organisations who may not be regulated by a professional body? 

Offshore members of UK professional bodies who advise on UK taxation are bound by ethical rules. But this is unlikely to be the main part of the population operating offshore. There is a need for this area to be reviewed.

Q: Is there an alternative to asking tax advisers to become full or affiliated members of a professional body?    

Yes, HMRC is also considering requiring anyone who wants to provide tax advice by way of business to register with a new government regulator before they could operate in the market. 

Q: How would this new regulator work, and which tax advisers would it cover?

Advisers would have to satisfy a ‘fit and proper person’ test in order to register with the regulator. We understand that this test would include proof of relevant qualifications or experience of professional practice, and also not having been subject to specific penalties, for example, for promoting or enabling tax avoidance.

Advisers who were admitted to the register could be subject to regular reviews of their continuing fitness and propriety, with appropriate enforcement action taken against those that breach standards.

One problem with this approach is that it would not, on the terms in which it is explained by HMRC, apply to promoters of tax avoidance who avoid giving ‘advice’ and merely provide avoidance structures. 

Q: Would such a new regulator actually solve the problem of unequal standards being applied across the tax market?

I believe the standards that would be imposed are, in general, lower than those already required of professional body membership. In short, it will ignore what has been achieved in recent years by the professional bodies working together to create the PCRT, and with HMRC to raise standards. In some respects, the government regulator might serve to undermine those standards because those interested in cutting corners would be able to buy a veneer of respectability through registration without conforming to higher professional standards.

Q: A new regulator also sounds like yet another layer of expense for tax agents who already have to comply with anti-money laundering regulations and PCTR.

I agree. A new government regulator risks being costly and ineffective. There will be registration and supervision costs alongside professional body membership, all of which will likely be passed on to the customer.

Q: Is it appropriate for the state to regulate tax advisers with one hand and also exercise a coercive power to require its citizens to pay tax?

I do think there is a potential conflict of interest there. You could manage it a bit better if HMRC were not itself the regulator. It would be better still to act through the professional bodies – the law could place requirements on those bodies to uphold high standards, without embroiling state agencies directly in collecting taxes from people on the one hand and directly regulating the advisers that people turn to on the other.

Replies (84)

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By jon_griffey
28th Aug 2020 16:11

Surely this is a very straightforward matter. Grandfather all existing unqualified tax advisers into a new professional body, that is perhaps a division of CIOT or ATT or similar, immediately enforce CPD and PI etc on them and then start weeding out the cowboys. From that day onwards all persons offering paid tax advice to the public shall be required to have qualified with a professional body. There is no need for a new Govt regulator.

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By SXGuy
28th Aug 2020 16:24

And what about owning a practise whilst all this happens? Can't really put people out of business while they sort there mess out.

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By jon_griffey
28th Aug 2020 16:39

SXGuy wrote:

And what about owning a practise whilst all this happens? Can't really put people out of business while they sort there mess out.

Which is why I say give grandfathering rights to existing unqualified practitioners.

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By SXGuy
28th Aug 2020 16:51

Yes you did my apologies. I did have a reply to the article myself but it went off to the land of moderation and hasn't been seen since. I don't think they liked my reply.

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By Adrian Everton
03rd Sep 2020 12:34

Having prepared personal tax returns, trust and estate tax returns and advised individuals on straightforward tax planning for 60 years mainly within a legal practice, I fail to see how passing an exam and having qualifications is going to help me. Most of my clients are retired and I cannot see that a qualified person in is going to prepare returns better than mine, especially one in their 20s and be able to communicate on the same level! I do not become involved with VAT or company/partnership work and I already pay £300 pa to HMRC for Money Laundering Supervision (which I have never encountered, or expect to do so-complete waste of my money), having passed the Fit and Proper test. The former tax inspectors have a rightful case in point.

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By memyself-eye
28th Aug 2020 20:06

It's now nearly September and I've 6 months (at most) until I quit.

Thank god.

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By Red1960
01st Sep 2020 12:54

I imagine most practitioners will be green with envy.

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By NH
29th Aug 2020 06:28

I find this article very strange in parts, for example "We understand from HMRC that advisers who are not by members of professional bodies represent 30% per cent of tax agents, but those advisers are responsible for most of the behavioural issues HMRC encounter"
What behavioural issues are you talking about?
Avoidance Schemes? If so that statement is clearly false.
Bad advice? Cant be that, how would HMRC know?
Issues that come up in an enquiry? As far as I am aware HMRC have never asked me for my qualifications so again how do they know?

It seems very odd to me, and to make an article like this stand up, more digging into the detail is required

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By stepurhan
01st Sep 2020 09:14

To be fair to the article writer, I would note two things.

The 30% is a figure apparently alleged by HMRC themselves. As you say, it is hard to see how HMRC could come up with this figure. It seems likely it is based on suspect data and assumptions.

The claim is immediately followed by a request for data to be released so that proper judgement can be made on whether this claim is accurate.

So it is not the CIOT or the article writer actually claiming unqualifieds are the problem. It is HMRC alleging it without providing any data to back the assertion up.

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By AthollAccounts
02nd Sep 2020 10:36

Surely HMRC would have a good idea of qualification from ML supervision? Most if not all of advisors with a professional body will be supervised by them, while HMRC will supervise unqualified

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By Tom 7000
01st Sep 2020 16:33

mass processing firms claiming some sort of tax rebate ... thats what upsets them as the standards usually terrible

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By kevinringer
01st Sep 2020 16:47

In which case HMRC should launch enquiries. If HMRC then find the standard is terrible then HMRC are justified taking action against those agents. We shouldn't all be tarred with the same brush.

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By RayM55
01st Sep 2020 19:19

I understand it is more simply poor quality work.

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By wamstax
01st Sep 2020 23:20

The introductions are the usual general and misguided comments probably initiated by HMRC without any investigation - i.e. "We understand from HMRC that advisers who are not by members of professional bodies represent 30% per cent of tax agents, but those advisers are responsible for most of the behavioural issues HMRC encounter" -
This is such a misleading statement that it wholly undermines the whole basis of the alleged attack on "unqualified " tax advisers.
Before any credibility can be given to such a statement it would be necessary for HMRC to have asked the question why such and such an error has arisen and who is actually evidenced as creating the particular error. There is no good suggesting anecdotal evidence as regards allegations made for example during the conduct of an investigation.
Having done the investigation work on both sides - and while not diminishing the worth of the vast majority of qualified and unqualified tax accountants - I can say that I would be hard pushed to quote any % of advisers who whether qualified or unqualified actually created the mess that was encountered during the investigation. Perhaps somebody should make a freedom of information request on HMRC asking them to provide the % of qualified and unqualified tax advisers who were evidenced as creating tax frauds etc and the actions taken against them.
If this attack on the individuals freedom to be a tax adviser - whether qualified by experience and or passing exams in the Inland Revenue - is suggested to eke out the bad apples in the barrel then it is totally misguided and unwarranted.
Again this is HMRC's solution to their "perceived problem" - make all the unevidenced allegations that you think you can get away with on the basis that the easily conned parliamentary legislators will latch on to your rumours and justify giving more powers to an organisation that should be using its existing powers to eke out the bad apples and publicise the action taken against them.
If this attack is to cover up HMRC's failure to address "avoidance schemes" in the past and to put a stop to the schemes being peddled then it is clear that this is the usual road roller to crack a nut.
Avoidance pedlars do not in my view or experience give any tax advice (they merely sell a product that some "knowledgeable and probably qualified" tax specialist has devised) and therefore to attack or restrict "general tax advisers" plying their wares is a misguided attempt to cut off the supply of schemes.
Frankly I am glad that I have PI Insurance and keep my knowledge up to date - to enable me to specialise in Code of Practice 9 Tax Investigations - but with the greatest respect to all concerned I have absolutely no intention of joining any club however well meaning it is. The parliamentarians have already put in place a register and check on my "fit and proper" behaviour under the Money Laundering Regulations and while I have fully conformed to this requirement I say enough is enough.

Sort out your own mess by using the powers and tools that you already have and if they are so bad and actually deliberate fraudsters - prosecute the "tax avoidance pedlars" - if you can - and leave the majority of tax advisers who are doing their best and to the best of their ability to earn a crust alone (and to continue to help HMRC perform to the extent they already do).

Rant over and get your ducks and evidence in a row before you start to cast unjustified aspersions in the direction of the general body of tax advisers.

Some people might understand and agree that it is probably qualified tax advisers that generate the tax avoidance schemes and avoidance pedlars who sell them do not give tax advice. What about the "qualified tax adviser firms" who actually reap loads in commissions from introductions to the avoidance pedlars and then equally wash their hands of responsibility when the xxxx hits the fan.

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By mdoodney
02nd Sep 2020 10:02

That is an odd term if it comes from HMRC as references to behaviours would usually relate to inaccuracy penalty terminology and the behaviours for these are those of the client and not the agent. But then again what would I know, I'm not a member of a professional body so I must be part of the problem.

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By SteveHa
30th Aug 2020 11:37

Surprise surprise. A body that is likely to gain significantly from enforced membership is all in favour of enforced membership.

Who'd a thought it?

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By RayM55
01st Sep 2020 19:29

That is not a fair description of the CIOT position. Instead it is more that if Government is going to do something, that something should be along the lines of the current model.

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By Justin Bryant
01st Sep 2020 09:39

Well, the CIoT would say that wouldn't they? Also, interestingly, I tend to only see clients who have overpaid tax when dealing with an unregulated or otherwise non-qualified tax adviser, and so this may cause less tax take for HMRC.

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By cumulus
01st Sep 2020 09:44

There's already some regulation in place through the requirement to be registered for AML. However, I fear even this is not being followed by some tax advisers that are not supervised by an institute. So why would making it compulsory to be qualified make any difference to those who already flout that requirement.

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By Julie Harbot
01st Sep 2020 09:58

If you are not supervised by a professional institute for AML you have to be registered by , and pay a substantial fee, to HMRC, who then become your regulator.

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By SXGuy
01st Sep 2020 10:46

To which they already undertake a fit and proper test, so I'm baffled as to why we need to do it all again with a reg body.

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By djn24
01st Sep 2020 09:51

I just can't see this ever happening to be honest.
Surely, the biggest issues are with the larger firms promoting tax avoidance schemes to their wealthy clients. They would already be qualified so this would do nothing to address that.

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By Red1960
01st Sep 2020 13:29

I'd suggest that this represents the greatest threat to the exchequer by far, along with the effective control of the professional bodies by a clique at the top of the profession.

Let's just address the elephant in the room shall we? If HMRC has evidence of dishonest advisers assisting clients to defraud the exchequer why don't they do something about it? They already have all the statutory powers they need to do this.

Shirking their own responsibilities whilst developing ever closer relationships with the top firms whilst a revolving door exists between the two is both unsightly and unseemly.

One might feel justified in thinking that the worst has been going on for some time now and should be stopped in the interests of tax payers and honest practitioners regardless of the protests of the few who benefit from these arrangements.

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By Julie Harbot
01st Sep 2020 09:53

I agree with Jon Griffey, there needs to be some form of QBE brought into either ATT or CIOT for people that have worked diligently and without issue for a number of years. As a working mum I have never had the time, or the very considerable funds, needed to sit professional exams in the past. I am an tax agent with HMRC and have worked in practice for over 30 years, having dealt with all sorts of tax enquires in this time right up to commissioners meetings, I would consider my experience more valuable to a client than a newly qualified tax adviser with no work experience. To then say we cannot practice is grossly unfair.

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By RyanTheBeanCounter
01st Sep 2020 10:04

With 30 years of practice experience, and assuming a significant amount of that time was spent dealing with taxation, surely the professional exams would largely be a walk in the park?

I don't understand your argument - you have all the prerequisites in place to make light work of these exams and they are not so expensive it is financially impractical to sit them.

For clarity I'm all for this change btw.

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By SteveHa
01st Sep 2020 10:20

I'm in complete agreement with you. I worked within HMRC for 20 years, and a further 20 years in practice. Suddenly, the CIOT think I'm not worthy. I was considering sitting for CTA, but this elitist attitude makes me not want to.

And they have completely failed to address someone in my position, QBE (considerable "E") but working as an employee in a supervised practice (formerly ICAEW, currently ACCA). Would they see me sacked because I personally don't pay them a fee?

And judging from many many comments on these forums, the PBs offer little to no value to small practices, anyway. They are nothing more than spongers in life is the way I see it.

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By Echo761
01st Sep 2020 11:11

I am qualified both by considerable experience and examination, I have seen too many "QBE" ex tax inspectors... having a go at VAT (which they just don't understand) and getting it completely wrong. If ex department people feel so confident in their abilities surely an exam would be a breeze... just saying.

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By RayM55
01st Sep 2020 19:26

The Institutes position is not that everyone should be made to join a Prof Body overnight but at present members of the CIOT are required to have PII, undertake CPD, can be fined or expelled by an independent disciplinary body and they also suffer damage to the reputation of the profession as a result of the activities or a small number of advisers.

At some point a Government will do something and that might be even worse!

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By AthollAccounts
02nd Sep 2020 10:42

It's not just the exams, it's getting experience signed off. If you're QBE but a sole practitioner and have been for years its not fair to expect them to be supervised by another firm for a few years to get that signed off. It's also a lot of expense

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By AndyC555
01st Sep 2020 10:03

I wonder if HMRC would accept the certificate they issued me with when I passed my exams and became a FT Tax Inspector. It's the only tax qualification I have.

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By Echo761
01st Sep 2020 11:12

As above...I am qualified both by considerable experience and examination, I have seen too many "QBE" ex tax inspectors... having a go at VAT (which they just don't understand) and getting it completely wrong. If ex department people feel so confident in their abilities surely an exam would be a breeze... just saying.

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By SteveHa
01st Sep 2020 11:54

Please show some evidence that QBE don't understand VAT, rather than simply making inflammatory comments that hold no substance.

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By Echo761
01st Sep 2020 12:57

Hi Steve
My evidence is by experience... sorry no evidence - similar to those QBE - no evidence. You cant have it both ways.
My comments are not meant to be inflammatory, just factual.

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By wamstax
01st Sep 2020 23:34

Hi Echo761 - In response to your comments I am guilty of having dabbled in VAT - I need to from time to time because of my specialist work (COP9 Tax investigations) - but I can say without any shame that I have actually been able to disagree with and win arguments with HMRC VAT experts from time to time. I will say however that I do have appropriate VAT expertise available when I am in danger of getting out of my depth on the VAT side. With respect VAT is not that complex and I have no intention of sitting any exams to please anybody.

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By Echo761
02nd Sep 2020 09:06

You are right, VAT is not that complex - ask anyone. CIOT has been wasting its time devising those pesky exams, lol. But, wait if it's not that complex why do you use VAT experts? and why do your clients get caught out by it, seems you are misleading clients that they need your assistance?

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By AndyC555
02nd Sep 2020 11:49

Probably why I don't get involved with VAT.

I've seen too many accountants having a go at tax planning (which they don't understand) and getting it completely wrong.

Accounting and tax are two very different and very vast fields of expertise and I cheerfully admit to my ignorance of accounting (and VAT) and is why I'm the tax specialist in a team (and we outsource VAT planning). I do wish more accountants were more ready to admit their ignorance of tax (including VAT).

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By Echo761
02nd Sep 2020 12:06

I agree Andy. There is no shame in not being an expert in every field. There is shame in "having a go" then having to explain to your client why you stuffed up.... especially if it is a costly mistake. Loss of client, face, and credibility.

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By Echo761
01st Sep 2020 10:05

It is quite staggering the arrogance of HMRC to trump up these figures when they themselves are (in the vast majority of cases) not qualified, either by experience or by structured, certified, exams.

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By Michael Davies
01st Sep 2020 10:20

Bizarre.I have worked for qualified firms without a tax specialist.Yet they would be authorised under the proposals.No need for any new regularity body;HMRC AML unit would just require a limited degree of expansion.Although the fees are already prohibitive.The big offenders by definition would have to be “authorised “ firms.A sophisticated taxpayer with a lot of money to “hide” is unlikely to use an unqualified back street accountant.Years ago Investigative Inspectors working on grass root investigations covered their costs ten times over.Surely the answer is to go back to that system ?I am glad that I am about to wash my hands of the whole process.Best of luck to those staying in the industry.

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By whiteways
01st Sep 2020 10:28

The article is headed "All tax advisers should be qualified", but it's quite misleading because the government appears to be suggesting they be associated with a regulatory body, which is not the same thing at all.

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By Echo761
01st Sep 2020 11:14

I don't think tax advisers associated with the national association of decorators would be much use... hahaha. So surely it has to be a relevant body and access to these is by examination?

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By Echo761
01st Sep 2020 11:14

I don't think tax advisers associated with the national association of decorators would be much use... hahaha. So surely it has to be a relevant body and access to these is by examination?

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By whiteways
01st Sep 2020 11:32

Well some professional bodies are accessible without passing a written exam. Be that as it may, the headline is still misleading.

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By whiteways
01st Sep 2020 10:29

The article is headed "All tax advisers should be qualified", but it's quite misleading because the government appears to be suggesting they be associated with a regulatory body, which is not the same thing at all.

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By Mr J Andrews
01st Sep 2020 10:40

So, the Govt has found time in this unprecedented state of affairs to come up with proposals that tax advisers should be regulated by some new unknown quango - or join a recognised professional body. It goes without saying that professional bodies would prefer the consequential and not insignificant fees coming their way to accommodate this proposal.
But the alleged 30% of NNQ advisers should be given the equal opportunity of offering their proposals ; particularly into the unfounded statement by HMRC that this same 30% are MOSTLY responsible for BEHAVIOURAL issues they face.
I'm flabbergasted that such spin is tolerated . We have a dumbed down , inferior Govt department , probably at its lowest ever point in history offering a third class service, relying on an inferior computerised system.
Tax agents , qualified or not should rally round and counter these proposals and demand , not propose , some normality to HMRC's current demise.
I would also suggest that some of these so called behavioural issues are tax agents giving HMRC a hard time owing to the Revenue's shortcomings.
Interesting too, the ''Tax Agent Segementation Research'' was conducted in 2014, which speaks volumes.

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By Husbandofstinky
01st Sep 2020 10:44

Wow, that monthly magazine may still have some value then.

Of little consequence to the Carrilion creditors and future fails.

Cynicism aside, this does have some legs although a professional body will of course take that stance. Over the years I have come across many excellent QBE's and qualifieds who quite frankly were a waste of oxygen.. The grandfathering route would be the way to go imo.

Ten potential years left in this game is too long.

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By clairebear
01st Sep 2020 11:03

"We know very little about the population of advisers outside professional bodies"
And here in lies the very issue. We currently have people able to call themselves accountants with no experience, no qualifications. Same for tax advisers. Whilst many might be perfectly capable, there'll be plenty leaving a trail of chaos in their wake.
There needs to be some element of insuring that people who are providing this advice have got qualifications and continuing professional development as well.

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By whiteways
01st Sep 2020 11:50

We do. It's called professional indemnity insurance.

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By Springfield
01st Sep 2020 12:14

".....there'll be plenty leaving a trail of chaos in their wake."

Really? Do you know that or is that just an assumption?

My 20 years of QBE work shows me that it's the "qualifieds"who make the big messes and the QBE's who take the more diligent approach, who treat their clients as humans, not fee-paying commodities.

Just my experience though.

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By Echo761
01st Sep 2020 13:02

TBH, there are rogues in the QBE and qualified arenas, HMRC's view is not going to change that (given they can hardly throw stones). Similarly, CIOT just wants to increase membership and income so they are not exactly impartial.
Oh what a toooodooooo.

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