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CIOT: All tax advisers should be qualified

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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
Columnist
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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.

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Replies (84)

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By dmmarler
01st Sep 2020 11:04

HMRC needs to advise what sort of "behavioural issues" they have with the unqualified accountants and with the qualified ones so we can understand where the problems lie. Then we may be able to make suggestions as to how this can all be restructured, and whether it is necessary. It could just be human fallibility, or wanting to work by the legislation rather than HMRC's guidance. If both groups come up with about the same percentiles, then there is no need to dig this up again to examine the entrails and to drum up business for CIOT. My recollection of the last CIOT exam paper was organising a business to get the greatest tax benefits and nothing about the best business management.

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By whiteways
01st Sep 2020 11:35

I can see the sense of making PII mandatory, but the rest of it seems like an expensive sledgehammer to crack a nut.

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By Ralph-gab
01st Sep 2020 12:04

Once again this comes up. Having been an unqualified accountant and advisor for 40 years since leaving H.M. C&E in 1980 this has come up periodically. I gave up accountancy for 6 years to run a pub and then got a job with a Chartered accountant. I found that my self taught standards were as high as my employer's and being ex C&E I dealt with all the VAT enquiries which came in. I then had to relocate to the North East and got another job with a Chartered accountant. I was astounded at the poor quality accounts turned out. Anything to get a bill out to the client! HMRC aren't interested in accruals (except the fee, of course) and prepayments I was told. Even debtor and creditors were often overlooked. The VAT returns were done by the receptionist who had had no training and when we did the accounts for 2 contractors on flat rate VAT we discovered underdeclarations of £8000 for one and £10,000 for the other. The boss instructed us to say nothing to the client but the receptionist was instructed to add 1/4 to each of the following returns! (Obv the £10k should have been notified to C&E). We were caught out when one of the clients took a 3 month break but wanted to know why he still had VAT to pay. This from a Chartered Accountant! Dividends of £30k were omitted from a client's SA return and were the subject of a query from the new accountant. I compiled a list of such errors before I left, having been told he couldn't afford to keep me on. It ran to 2 pages. He had a compliance visit some months later and I was staggered to hear that he was given a clean report. Enough of my rant, just suffice it to point out that qualification and ICAEW membership is no promise of a good accountant in my experience. I later signed up with the CIOT with a view to qualifying in Indirect taxes as a CTA. I passed my first exam but then came Brexit and as I was studying cross border VAT and could see no point in continuing. This proposal sounds like more pointless and expensive regulation which will actually achieve nothing.

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Replying to Ralph-gab:
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By whiteways
01st Sep 2020 12:15

"Qualification and ICAEW membership is no promise of a good accountant in my experience."

So true.

My worst horror story was from a "Chartered" who told his client to roll over his Capital Gain by buying an antique car!

A 40K tax bill was the result!

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Replying to whiteways:
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By Ralph-gab
01st Sep 2020 12:29

Ranting again!
You have reminded me of a client we took from the largest firm of Chartered accountants in our town. My wife did the VAT return but when I checked it I realised that the company was partially exempt, but it was clear that no adjustment had been made to previous returns. I contacted the accountants and asked if they had checked whether the company was de-minimis. Their reply was that the client had not requested them to check!!!
I am currently with ICPA and a member of the VAT Practitioners' Group. Will those count?

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Replying to Ralph-gab:
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By Echo761
01st Sep 2020 13:06

Sorry unless you have Blue Peter badge and member of the Tufty Club... no way hosay! (Jose?)

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Replying to Ralph-gab:
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By whiteways
01st Sep 2020 12:15

"Qualification and ICAEW membership is no promise of a good accountant in my experience."

So true.

My worst horror story was from a "Chartered" who told his client to roll over his Capital Gain by buying an antique car!

A 40K tax bill was the result!

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Replying to Ralph-gab:
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By Echo761
01st Sep 2020 13:13

You make a very valid point about the cross border element of the CTA indirect tax paper.. surely the CIOT has heard of Brexit and the looming end of the transition period. Seems crazy to still include this part in the syllabus of the exam.

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Replying to Ralph-gab:
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By Red1960
01st Sep 2020 13:55

Sadly every single practioner will have their own horror stories relating to qualified practitioners from the micro-practice to top ten firms.

The basic problem is that HMRC are slamming a dead cat on the table whilst ignoring the real problem... their own failure to adequately police agents, qualified and not qualified, who should not be in practice. They have the powers to deal with this already.

Some would say that the real problem is the proximity of HMRC and the big players in the accounting profession all of whom have suffered accounting scandals in the past.

Didn't someone once say that the first stone should be thrown by one without sin... lest all the skeletons should come tumbling out of all the closets.

And we couldn't have that now.

Could we?

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By sculptureofman
01st Sep 2020 12:18

I wouldn't be opposed to this, as long as every member of HMRC staff was required to be registered.

They can't talk about how everybody else is causing problems when their own house is in such a mess.

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By Apache999
01st Sep 2020 12:24

The customer should choose the supplier.
The government should simplify the tax system.
HMRC should do more checks.

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By Apache999
01st Sep 2020 12:24

The customer should choose the supplier.
The government should simplify the tax system.
HMRC should do more checks.

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Replying to Apache999:
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By AnotherPerspective
14th Sep 2020 21:05

Wow. These three sentences reduced the problem to its nub with such violent accuracy.

Bravo.

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Replying to Apache999:
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By AnotherPerspective
14th Sep 2020 21:05

Wow. These three sentences reduced the problem to its nub with such violent accuracy.

Bravo.

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By whitevanman
01st Sep 2020 13:22

Never fails to surprise me that so many people read the words and give credibility to them.
Hands up all those who think HMG or HMRC give a fig about the poor standards of service that some clients receive. Hands up those who think this nonsense proposal would impact on the aggressive tax planning that is so often railed against.
Who believes that the non-qualified agents are the ones who cause / give most " behavioural problems", whatever they may be? Have a look at the reports of penalties in serious cases. These often involve qualified agents.
The fact is that HMG wants to cut costs (for HMG). They would like to cut back yet further on HMRC and effectively "outsource" the work to, you guessed, the profession (and consequently, the clients).
The process has been ongoing for some time. Look at how they deal with the largest businesses.
So, this will happen although it will take time to see the end result,which will be a system where the profession is regulated such that what they produce is what HMG/HMT/HMRC want and they need only check the checkers. HMRC can then be "slimmed down" leaving PWC et al to check the work of fellow professionals on behalf of the institutes / regulator. Happy days.

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Morph
By kevinringer
01st Sep 2020 13:59

HMRC has been promoting MTD because it will close the tax gap. If that was true then it doesn't matter whether the agent qualified or not because the wonderful software will get it right every time.

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Morph
By kevinringer
01st Sep 2020 14:02

I have no problem with there being a requirement for agents to have a qualification, as long as it is relevant. I'm ACCA and most of my exams had no relevance to tax. Almost all the knowledge and skills I have obtained have been in practice, not ACCA. Maybe we should all be CIOT or ATT?

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Morph
By kevinringer
01st Sep 2020 14:05

Over the last 10 years professional standards within HMRC have gone down the pan. If we're going to have to accept regulation, will HMRC accept the same? Maybe there should be an external regulator that regulates HMRC and agents?

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Morph
By kevinringer
01st Sep 2020 14:07

What will happen with filing-only agents? If it will still be possible to act as a filing-only agent then those that fail the regulations will simply become filing-only. They'll operate exactly as they did previously but without a 64-8.

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By psimonparsons
01st Sep 2020 15:08

An important first step is defining what ‘Tax Advice’ is?

A major area of tax application is payroll and the application of PAYE. The accuracy rates and expertise will be high.

Are they giving tax advice? What does that mean and to whom!

Now it is a requirement to be AML supervised to give advice. Is that happening or is the term confused?

As far as aware, there is no representative supervisory body for the agents, software are service that pays U.K. plc. The major players who cover a significant part of U.K. employment, are payroll professionals and not accountants.

So what is being talked about. Advice on what?

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Replying to psimonparsons:
Morph
By kevinringer
01st Sep 2020 15:15

Good point about definition of tax advice. Our payroll department is constantly helping employers and sorting out problems but I wouldn't say it is advice. But in recent months the payroll staff have had to handle loads of CJRS issues. Some of that is more akin to advice.

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By KenKLM
01st Sep 2020 16:02

jon griffey ... very well said but you know what will happen ... another opportunity to create a new government body to regulate then start charging yet another fee to ALL tax advisers including those already regulated and members of professional bodies . Create a few more highly paid public service jobs .

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By chronus
01st Sep 2020 16:07

It would seem the thing that kicked this one into play is :
"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."

One can only speculate as to what "behavioral issues" may be.
I would have thought the main issue is one that concerns the actual amounts of tax involved in any tax advisers behavior . That then brings into question who the big players are for tax avoidance advice.
Are all those unqualified little agents not offering tax return completion services for all the one man band CIS bricklayer, plasterer, labourer types who supposedly are self employed.

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By stephenj
01st Sep 2020 16:41

Many years ago the then government was looking at this and was thinking of bringing it in that all accountants who provided services to the public for which they were paid must be a member of an approved professional body and i assume that to be an accountant in practice this new thinking would apply to you. At the time i was involved with the aat looking at registration of aat members in practice and i recall that the aat were being considered as the professional body to admit unqualified accountants to as affiliate members and to give these affiliate members five years to pass aat tax exams and certain other papers to allow them to continue to practice. If after five years they had not passed these exams then they would have to cease offering accountancy services to the public, however the government didn't proceed with it at that time

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By Sue Murby
01st Sep 2020 17:00

Back in the 70's I failed an ICAEW paper entitled "Elements of Financial Decisions". I re-sat it and failed again and was then time barred. It was something that had real problems with understanding especially as I had problems with simultaneous equations at school. In the 80's I worked for one of the top 3 firms in a specialist tax department and when my job moved out of London, shortly after I had moved in a different direction I expanded my freelance activities. I'd had a few clients since I came out of articles.

During all this time I have never had an inquiry and I always check how my client's have supported themselves if their income is very low - and made a note on the Tax Return. Over 20 years ago I took over a small practice of a chartered accountant who'd died. I was surprised at some of his activities - inflating the provision for his fees in the clients' accounts and charging less. His clients were small - mainly builders, window cleaners, plumbers etc - and they nearly all left me because I wouldn't include the large estimates that he had been used to. A lesson I learned over years ago ( when an artist client in a practice I'd worked for never kept receipts for petrol, travel, stamps etc. She nearly always made losses and one year HMRC decided to query her accounts. The estimates equated to around £1000, which was pretty much the same as her loss. The estimates were disallowed.

My point is that many part qualified people like me are thorough and careful and there are some rogue qualifieds out there.

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By AndrewV12
02nd Sep 2020 08:30

Finally, its worth being a member of a professional Accounting body, its worth has been diluted for years now, there are many advantages to being not qualified.

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By AndrewV12
02nd Sep 2020 08:33

Don't believe what any Accountant will tell you (most un-qualified) passing exams is the only independent test of what anyone knows about Accountancy or Taxation.

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Replying to AndrewV12:
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By AnotherPerspective
14th Sep 2020 21:23

I agree in concept. But independence is somewhat a problem here though, isn't it?

As far as I can tell from the outside (please correct me if I'm wrong, I have Googled but a few minutes on it), each examining body is also a professional body e.g. derives profit from membership. This is a conflict of interest that, given sufficient time, ensures standards will drift away from any would-be altruistic goal of serving the general public, and instead will mainly serve the membership body itself.

Also, as we're seeing a lot here, if you've invested in becoming part of the club, it's somewhat like a frat boy hazing ritual: you are thoroughly 'bought-in' and cannot imagine not loving the club.

Qualification and association membership would need to be fully decoupled before qualification could be trusted to be independent.

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By Self-Employed and Happy
02nd Sep 2020 10:46

Wonderful.

Over the lockdown period we gained quite a few clients, we inherited some absolute dross from Bookkeepers with no qualifications making a complete hash of things like CIS and doing things that was clearly outside of their expertise.

Whilst of course there will be many very good QBE people out there I don't believe this is something that can be tackled on a case by case basis. Make everyone who is not currently affiliated with somebody sign up to a particular membership.

Then the standards of the absolute dross should improve with compulsory CPD, I can't see why anyone would be against attempting raising the overall quality / level of work in the profession.

Yes people may see it as beneath them because "they used to be qualified / a member and gave it up because they saw no benefit" or that they are diligent professionals who are good at their jobs but times change.

Maybe for once being a paid up member / qualified will have a distinct benefit.

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Replying to Self-Employed and Happy:
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By whiteways
02nd Sep 2020 11:08

"I can't see why anyone would be against attempting raising the overall quality / level of work in the profession."

What I'm against is the prospect of having to suddenly take exams at 61 years of age to do a job I've done perfectly adequately and without incident for the past 37.

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Chris Caspell CTA TEP
By ccaspell
02nd Sep 2020 12:01

As I understand it, the sticking-point here is not that all tax advisers should be qualified in some way or other, but how to transition those who are currently unqualified into the 'qualified' camp. Being qualified does not guarantee perfect tax filings (just as being unqualified does not mean shambolic filings) however if a tax adviser has had some training to a recognised level and is required to keep up with their CPD & ethical requirements, this is more likely to lead to more accurate tax filing in the long term, accepting that there will always be the bad apples.

In the US, anyone who deals with the IRS on behalf of paying clients needs to be qualified. There are CPAs, Enrolled agents and Annual Filing Season Program participants (amongst others) who have authority to act and their qualification limits that they can do with the IRS.

When they introduced the driving test in the UK, it was voluntary at first. Maybe something similar could be achieved within the tax advice profession. Maybe they should consider how to make becoming qualified to an acceptable level not so hard - perhaps through some sort of file review and monitoring rather than examination. Having different levels of qualification (as they do in the US) so that those currently unqualified do not see their livelihood removed, could also be a consideration.

At the end of the day, those that are qualified will generally vote for more regulation whereas those without formal qualifications will vote for less. I believe that all of us working in practice want to get rid of shoddy and incompetent work - either through adviser education or them being barred from dealing with HMRC. We just need to work out a way to do this without disenfranchising those who are perfectly capable but don't have a piece of paper to prove it.

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paddle steamer
By DJKL
02nd Sep 2020 23:05

What a depressing conversation yet again (Groundhog day).

Frankly if I were to "qualify" individuals to operate in practice I would ignore all exams, instead I would rely upon a signed off training diary which demonstrated a range and depth of experience across accounts, tax , payroll and other relevant facets of the profession which are required to offer the particular services/advice offered , no certified experience for a particular service no offering any services beyond those that are certified- CPD can be added throughout one's career if one wishes to expand the range of services.

I hold an MA from Edinburgh Uni, a PG Cert of Accountancy from Aberdeen Uni, 2.25 years as an ICAS trainee all signed off, a further seven years in practice for a CA practice in large part signed off, over 25 years in industry as an accountant plus another circa ten years as owner of my own practice, yet I have no professional piece of paper to show for it;-, when I was in practice I carried PII, I performed CPD , I was for part of the time an ICPA member but no bits of paper except vast numbers of timesheets, work diaries and both ICAS and ACCA experience books in my attic, all detailed and signed off by Chartered Accountants as a fair representation of the types of work undertaken by myself.

If Accounting Web Any Answers is anything to go by there are unqualifieds who ought never to be let anywhere near a client and those purporting to have passed exams who likewise ought to hang their heads in shame, nothing, exams, self study, nothing beats experience. (All imho, but as I retired from practice last September I now have no skin in the game)

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By raphipps99
13th Sep 2020 00:08

I think this is well overdue and absolutely right. We invest in our education and spend years gaining experience operating within an ethical code. We are therefore regulated, have compulsory PII and monitored for AML. In my experience the general public are often unaware of the difference. Anyone can call themselves an Accountant, Tax consultant or Tax Adviser and set up a business offering these services. The public have no protection. Isnt it stange that your electrician is regulated and your heating engineeer who services your boiler is regulated, Financial advisers and lawyers. Yet anyone can prepare a tax return with all its potential complexities.

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By AnotherPerspective
14th Sep 2020 21:42

"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."

Odd. HMRC didn't ask that. It's almost as if it was designed to court controversy in this forum... The closest they came was to ask:

"Q9. Do you have any evidence about the impacts of unqualified agents or agents that don’t meet
standards? "

Note that the 'or' in the question would appear to suggest that HMRC are asking about all kinds of agents, not just unqualified agents.

We're quick to paint HMRC as behaving dismissively towards unqualified agents, but this doesn't seem to be the case in the material question (now, the small matter of asking only professional bodies to respond with evidence, on the other hand, does seem somewhat to suggest a foregone conclusion in the answers HMRC would like to hear...)

The answer provided by CIOT:

"As above, there is anecdotal evidence from members that costs arise [...] We have understood from HMRC in recent years that although 70% of agents hold professional qualifications and 30% do not, the problem behaviours noted by HMRC are in broadly the opposite proportions, that is, the great majority of problem behaviours come from the minority of advisers without qualifications. [...]"

I'd love to see the source of the statistics being referenced here, as it seems to be the crux of the matter. If CIOT understand this to be the case, upon what basis do they understand it? What data has HMRC provided to them? Alas, without a justification for this claim, I'm left wondering if there is any evidence of need for this at all. These percentages might be true, but they might be false. There's anecdotal evidence for alien abductions, but that doesn't mean I believe in them, nor should I prepare an entire system of defense for such an apparent threat.

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