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HMRC agent services – or some more equal than others

27th May 2016
Tax writers and lecturers
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Subtle changes in strategy which will affect Agents the length and breadth of the UK were outlined by HMRC last week in its Talking Points session on Agent Services.

As it rolls out Agent Services (formerly AOSS, Agent Online Self-Serve), HMRC will start ‘risk assessing’ Agents, ‘segmenting’ the Agent population, and providing ‘differentiated’ services. 

And it all starts with sole practitioners.

What sort of risk are you?

Under the heading of 2016-17 proposed deliverables, come the enhanced online agent authorisation service (OAA), and the Agent ‘subscription process.’ This, essentially, is the gateway to data collection about Agents - and risk assessment checks.

HMRC will increasingly be collecting data on Agents as part and parcel of its Agent verification procedures.


For subscription, read Agent profiling.  For 2016-17, the questions to be asked are likely to be ‘very simple’. They ‘may just be’ the name and address of the Agent, together with a record of whether anti-money laundering registration is held. But ‘over time,’ the data required to ‘subscribe’ will be expanded, with additional information, yet to be decided.

Once Agents have ‘subscribed,’ they will be assigned an Agent reference number. This will be necessary before Agents can access HMRC services through their third party software.

HMRC intends to start the process with sole practitioner Agents.

Small isn’t beautiful

Some of the facts and figures HMRC presented back in 2015 hint at HMRC’s concerns.  According to HMRC, of the 43,000 paid Agents in the UK, serving 8m clients, 65% of Agents are ‘sole traders’, 55% have fewer than 50 clients, 82% of them ‘employ at least one professionally qualified person’ and 65% operate below the VAT threshold.

To borrow from the poet Burns – to see ourselves as others see us... But if we did, the future might seem a bit dispiriting for small practices.  Because HMRC clearly attributes some of the tax gap to poor Agent performance.  And looking at these statistics, the small practice sits prominently in its sights.

So small isn’t beautiful (though it frequently is.) It’s become suspect.

Agents in boxes

Going back to the 2015 ICAEW Hardman lecture by Robert Maas and the earlier HMRC webinar on Agent differentiation, we have HMRC’s initial classification strategy.  

At this stage, Agents were to be consigned to various boxes: Assured, Good and acceptable, Poor and Unacceptable.

Good guys and bad guys

Good Agents add value. They exercise due diligence, upskill clients, help ensure compliance and aid client growth and prosperity. They engage with HMRC on a professional basis, meet high professional standards of competence and continued professional development.

The bad guys on the other hand, are weak in technical competence, lack due diligence and reasonable care, place the tax take at risk ... and are an unnecessary burden on resources. 

They are disengaged with HMRC processes, raise obstacles to good compliance, disrupt and hinder enquiry work. They can be deliberately non compliant and dishonest. At the most extreme end of the spectrum, we have the RTDWs: the ones HMRC ‘Refuse to deal with’.

Hands up which Agents want to consign to that circle in HMRC’s Inferno?

Changing perspective

But this time round, the nuance is subtly different. We seem to have moved from carrots for the good guys, to risk assessment profiling before Agents can even access HMRC services through third party software. We are talking about increasing levels of HMRC monitoring and control.

And we are talking about an Agent population which is being segmented by HMRC and a future where ‘Agents will experience differentiated services’. 

A brave new world where all Agents are equal – but some are more equal than others?

Replies (7)

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Tony Margaritelli, ICPA Chairman
By Tony Margaritelli
28th May 2016 20:41

Welcome to the world of Differentiated Agent Services or DAS which I warned about some time ago. Expect that HMRC will restrict Agents THEY believe to be not good agents based on their perception. Some agents will be fated with by HMRCs largesse whilst others will find their access to services restricted. As I have said consistently that HMRC don't really like us and are blaming us for their inability to collect taxes that actually are not due. Tony Margaritelli Chair ICPA

Thanks (0)
By Tim Vane
31st May 2016 10:32

The sad fact is that HMRC are absolutely right to be concerned, as the general standard of agent competence at the lower end of the sole trader spectrum is apalling.

An ever-increasing number of those agents are just moonlighters - people who have another full-time job and who are slowly gathering a client base in their part-time practice. And many of them are industry accountants who do not have any practice experience, have inadequate tax training and, quite simply, do not really know what they are doing.

I would say that more than half of the clients that I pick up from such sole practitioners have serious problems with their accounts or previous tax returns, and multiplying this across the industry, HMRC are probably right to assume that significant tax losses are the result.

Of course, it is also true that occasionally the errors made are such that the client has overpaid tax, sometimes quite significantly, but it does seem that the majority of errors made by agents seem to favour the client. Perhaps not surprising given the clamour to attract clients at the bottom end of the market.

There are a lot of very moronic questions posted on this website by so-called "professionals" who are taking money from clients and "advising" despite having inadequate knowledge, training and experience. HMRC are probably right in thinking that this is the tip of the iceberg.

Thanks (3)
By Tom 7000
31st May 2016 12:01

55% have less than 50 clients... say 40 clients at £300 each its just about minimum wage....hard to believe that.

...they must all be part time doing mates accounts in the evenings for fun/holiday money...

Thanks (1)
By dmmarler
31st May 2016 12:33

In other words we are looking at the qualified and unqualified accountants, and of the qualified individuals whether they are registered with their respective professional body to work in practice. This has been on the cards for a long time. In fairness I would say there are some excellent accountants qualified by experience alone, and some not so good qualified ones. I trust HMRC gets accurate information from its respective sources, and wonder how the practitioner will be able to establish it has accurate information before being cut off from access to software and income.

I am surprised at the numbers HMRC thinks are sole traders. This may be because HMRC systems do not easily accommodate small partnerships or limited companies. I suppose complaining about systems or an accountant asking HMRC what information it holds on him/her (or anything else for that matter) would be considered "raising obstacles". We will even have to be careful about comments on HMRC in public, such as this discussion!

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By richardterhorst
31st May 2016 12:39

The question is can we trust HMRC?

Thanks (3)
Replying to richardterhorst:
By taxbakbristol
31st May 2016 13:09

Where did HMR&C obtain this information from?
I would want to see the data source as I do not believe anything that HMR&C exhibits!
Why oh Why don't they tackle the real problems- answer the phone , reply to letters within 2 weeks. Go after the BIG BOYS tax - or are HMR&C just to scared that they lack competence to do this so they harry the taxi driver and fish shop proprietor- its their easy objective.
Watch for wriggling about when the PAC asks them how much additional tax they received by aggressively persuing PANAMA tax evaders!

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Glenn Martin
By Glenn Martin
29th Jun 2016 18:08

I have no objection to regulation but what worries me is HMRC ability to get things wrong.

What are the timescales for implementing this and when will your grade be made available.

Are we supposed to to start sacking clients who don't pay tax up front and on time.

Also now do HMRC which accountants "upskill" their clients simply from the tax return that gets submitted.

Thanks (1)