The standards HMRC expects from tax agents have been updated to reinforce the Revenue’s stance against aggressive tax planning and money laundering, targeting especially those not regulated by a professional body.
Released on the 4 January, HMRC’s Standard for Agents echoes the revised Professional Conduct in Relation to Taxation (PCRT) which came into effect on 1 March 2017.
The Standard for Agents explains that agents should act “lawfully” and with “integrity” and that any tax planning should be based on “realistic facts and a credible view of the law”.
HMRC expects agents to advise clients where there is “a material uncertainty in the law” and as such, the risks and costs associated with any resultant court cases pursued by HMRC should be communicated to clients.
Targeting unrepresented agents
All members of the seven professional bodies (AAT, ATT, ACCA, CIOT, ICAEW, ICAS and STEP) are expected to abide by the PCRT, which has 55 pages of advice and guidance on all aspects of tax-related work.
Since around 70% of agents are represented by a professional body, the HMRC standard for tax agents is aimed at sweeping up those agents who are not represented by a professional body, so HMRC can establish a common standard for all agents.
HMRC also outlines the professional competence expected from tax agents – such as maintaining up-to-date knowledge and preventing errors in their client’s tax claims – and professional behaviour (dealing courteously and professionally with HMRC staff and clear terms of engagement with their clients).
The document also reinforces the importance of accountants adhering to the money laundering regulations and what that means in relation to their work with tax.
The latest standard incorporates the three of the five PCRT principles of integrity, professional competence and due care and professional behaviour. HMRC said these principles are “essential to the relationship” it has with agents.
The PCRT principles not incorporated into the updated HMRC standard for agents are objectivity and confidentiality. HMRC said these principles are essential in the client-agent relationship and that is the role of professional bodies to regulate, not HMRC.
“Not all agents are signed up to the PCRT, so HMRC very sensibly thought we should have something,” said ICPA’s chairman Tony Margaritelli, who has been involved in the Agent Strategy group’s discussions about the standards for agents.
But unlike the substantial PCRT, the comparatively paper-thin HMRC document still leaves what constitutes as aggressive tax planning as a grey area and open to interpretation. “HMRC just says agents must not create, encourage or promote tax planning that is contrary to the clear intention of parliament on it,” said Margaritelli.
“I understand what they are trying to get at, but it is very difficult when you have to put these things into words. I think they've put together something small and simple and leaves it open to interpretation - both ways.”
The profession reacts
The ICAEW Tax Faculty also welcomed HMRC’s “PCRT lite” standards because it shows HMRC is taking an “active interest in the performance of agents who are not members of a professional body”.
Furthermore, the Tax Faculty said the updated standard makes it clear that unrepresented agents “should not undertake aggressive tax planning of the type that does not meet the test set out in the PCRT”.
Elsewhere, Margaritelli was pleased HMRC referenced the taxpayer’s charter and what agents can expect from HMRC at the beginning of the document: “My view is: read the standards for agents, then read the taxpayer's charter and you've got both sides.
“If HMRC is going to hold us to some sort of level against this standard, we've got to be careful that we equally hold them to the same level where the taxpayer's charter is concerned.”
About Richard Hattersley
Richard is AccountingWEB's practice correspondent. If you have any comments or suggestions for us get in touch.