HMRC’s efforts to improve tax advice will mean all advisers will be required to hold professional indemnity insurance (PII), but this means practices may have to carry the cost of premiums going up.
Have you found this content useful? Use the button above to save it to your profile.
One of the papers released on Tax Day in March that created the biggest stir was a consultation into compulsory professional indemnity insurance (PII) for all tax advisers. The move follows HMRC’s long standing campaign to ‘raise standards in the tax advice market’.
While they were supportive of PII cover, they raised concerns about the costs this will inflict on practices and whether this is really the right approach in clamping down on a small minority of unscrupulous advisers.
Margaritelli feared the measure was like HMRC “taking a shotgun to shoot an individual person”.
How will this affect accountants?
Benneyworth explained that the mandatory PII measure has its roots in the sale of loan schemes; whether that’s people running the schemes or firms and advisers referring clients and taking a kickback. But the desire to regulate this bad behaviour may see indemnity insurance soar for practitioners.
“If you’re an accountant or specialising in tax, or anyone giving advice, you’re going to want PII,” said Margaretelli. “Mistakes happen. No one can say they will never make a mistake. There isn’t an institute or organisation that doesn’t have a mandatory PII.
“However, making it mandatory and then policing it is fraught with all manners of danger, '' continued Margaritelli. “The biggest thing I can see is that costs will escalate.”
The cost of PII is based on every individual’s quality of work and claims history. “However, if these small numbers of insurers in this marketplace are told that they have to insure everybody… my premium will not be down to me or the work I do. The prices will ratchet up.”
Margaritelli could see larger practices passing on the cost, but he’s concerned that mandatory PII will impact smaller practices the most.
How effective will it actually be?
And then the question is whether the measure will even be successful in stopping those promoting loan schemes. Again, Margaritelli is not convinced.
“The fact of the matter is that as taxation continues to increase… there will always be someone or people that will work out some form of scheme to get that tax down,” he said.
Register for free to continue reading
It’s 100% free and provides unlimited access to the latest accounting news, advice and insight every day. As well as access to this exclusive article, you can:
Here's the rub, HMRC are driving this when they are consistently and demonstrably giving out and publishing more bad advice than the profession ever has, but no-one holds them to account. Sure, the PAC may chime up once in a while, but without teeth, the worst offenders will continue to go unpunished.
Mandatory PI has to be a good thing and is long overdue. However the market for PI is not great at the moment. I understand that a number of players have left the market. Last year our premium trebled and this year we could only get quotes off 2 insurers. That is despite being a plain vanilla firm, having never been involved in tax schemes etc and with a clean claims record.
According to Margaretelli, the consultation document also quoted “not spotting VAT going over the VAT threshold” as poor tax advice. But he questioned whether it’s really fair to pin all the blame on the accountant.
Seeing as some clients might not even be in contact for most of the year, can't see how this would be poor tax advice. Might as well say that it's HMRC's fault that they didn't spot it from the accounts (notice they never seem to pick this up despite having all the information provided?).
Can HMRC also be forced to have cover so we can claim against them every time they make a mistake? How about they improve their own house first?
And I'm actually in favour of everyone who gives tax advice (or any sort of advice) having PII cover. I'd also be happy having something similar to the US system of approved advisors- as long as HMRC staff are forced to pass the same exam!
And the poor work of HMRC. Should we not insist they carry insurance and then when they [***] up pay the bill at our rates not some micky mouse ones.
And as one poster said what if HMRC gives bad advice (Not unknown I may add).
Mandatory PI will not solve things like the loan scheme etc. etc. Its not an enforcement product. If HMRC wishes to force advisors to give better advice (which does not mean that which only agrees with HMRC's version) then use the tools they have or get more from parliament.
I think a good start would be making the list of firms supervised by HMRC for Money Laundering Regs, a publicly available record. This would help weed-out unsupervised providers, that don’t play by the rules. Supervised firms, requiring compulsory pii already, promoting loan schemes are relatively easy to spot.
Then, by all means, let’s all have pii. It’s too easy to fly below HMRC radar at the moment.
I think a good start would be making the list of firms supervised by HMRC for Money Laundering Regs, a publicly available record. This would help weed-out unsupervised providers, that don’t play by the rules. Supervised firms, requiring compulsory pii already, promoting loan schemes are relatively easy to spot.
Then, by all means, let’s all have pii. It’s too easy to fly below HMRC radar at the moment.
This List is, I'm afraid, not much use...
It looks like it only covers Firms supervised by HMRC
I'm not on it and I'm supervised by my professional body
Of course, all the "fly-by-nights" who aren't registered with anyone and just "Help" people to file under their own names will continue to go under the radar compulsory PII or not.
As others have already said anyone registered directly or through a professional body is required to have PII anyway
As usual this is deflecting from the real problem whilst some one can say "I've done something about it"
Surely anyone who takes their practice seriously will have PII already. If you are regulated by a professional body then it obligatory and if you aren't then surely you would want the added protection.
Why should PI go up? Have there been loads of massive claims that will continue??????????
Those that want to fiddle, will fiddle and get away with it. They always do and rules are made so that the majority of us who try and run a decent practice are penalised, but HMRC get the money they lost to these fraudsters from the honest tax payer.
Mandating PII will have Zero effect on standards in the tax advice market as no-one is actually policing the tax advice given.
I predict regulation of tax advisors with another load of rubbish we'll have to comply with..... and the rogues will ignore it all and get away with it.
I agree. There is a significant minority of 'accountants' that, I suspect, play a numbers game - file anything and duck when something comes back.. The system is very poorly policed. On top of this taxpayers are actively encouraged, by HMRC and latterly the accounting software companies, to go it alone, despite the fact that it can be complex, resulting in another raft of poorly prepared tax returns. I don't think they're [HMRC] really bothered. Everything is viewed at a macro level nowadays, with insufficient resources to dig into the detail.
There may not be an appetite for it but I'd venture that making it a legal requirement that all businesses in whatever UK form must be registered and publish ownership and trading address details would be an even better idea.
Replies (14)
Please login or register to join the discussion.
Here's the rub, HMRC are driving this when they are consistently and demonstrably giving out and publishing more bad advice than the profession ever has, but no-one holds them to account. Sure, the PAC may chime up once in a while, but without teeth, the worst offenders will continue to go unpunished.
Mandatory PI has to be a good thing and is long overdue. However the market for PI is not great at the moment. I understand that a number of players have left the market. Last year our premium trebled and this year we could only get quotes off 2 insurers. That is despite being a plain vanilla firm, having never been involved in tax schemes etc and with a clean claims record.
When you say trebled, how much are you talking? I mean, were you paying a crazy low price before?
Ours has stayed the same for the past few years. HCC via John Heath if I'm allowed to mention it.
According to Margaretelli, the consultation document also quoted “not spotting VAT going over the VAT threshold” as poor tax advice. But he questioned whether it’s really fair to pin all the blame on the accountant.
Seeing as some clients might not even be in contact for most of the year, can't see how this would be poor tax advice. Might as well say that it's HMRC's fault that they didn't spot it from the accounts (notice they never seem to pick this up despite having all the information provided?).
Can HMRC also be forced to have cover so we can claim against them every time they make a mistake? How about they improve their own house first?
And I'm actually in favour of everyone who gives tax advice (or any sort of advice) having PII cover. I'd also be happy having something similar to the US system of approved advisors- as long as HMRC staff are forced to pass the same exam!
And the poor work of HMRC. Should we not insist they carry insurance and then when they [***] up pay the bill at our rates not some micky mouse ones.
And as one poster said what if HMRC gives bad advice (Not unknown I may add).
Mandatory PI will not solve things like the loan scheme etc. etc. Its not an enforcement product. If HMRC wishes to force advisors to give better advice (which does not mean that which only agrees with HMRC's version) then use the tools they have or get more from parliament.
I think a good start would be making the list of firms supervised by HMRC for Money Laundering Regs, a publicly available record. This would help weed-out unsupervised providers, that don’t play by the rules. Supervised firms, requiring compulsory pii already, promoting loan schemes are relatively easy to spot.
Then, by all means, let’s all have pii. It’s too easy to fly below HMRC radar at the moment.
Is that not available here?
https://www.gov.uk/guidance/money-laundering-regulations-supervised-busi...
I have heard that if you complain that someone is not not on the list, nothing gets done about it.
This List is, I'm afraid, not much use...
It looks like it only covers Firms supervised by HMRC
I'm not on it and I'm supervised by my professional body
Of course, all the "fly-by-nights" who aren't registered with anyone and just "Help" people to file under their own names will continue to go under the radar compulsory PII or not.
As others have already said anyone registered directly or through a professional body is required to have PII anyway
As usual this is deflecting from the real problem whilst some one can say "I've done something about it"
Surely anyone who takes their practice seriously will have PII already. If you are regulated by a professional body then it obligatory and if you aren't then surely you would want the added protection.
Why should PI go up? Have there been loads of massive claims that will continue??????????
Those that want to fiddle, will fiddle and get away with it. They always do and rules are made so that the majority of us who try and run a decent practice are penalised, but HMRC get the money they lost to these fraudsters from the honest tax payer.
Mandating PII will have Zero effect on standards in the tax advice market as no-one is actually policing the tax advice given.
I predict regulation of tax advisors with another load of rubbish we'll have to comply with..... and the rogues will ignore it all and get away with it.
I agree. There is a significant minority of 'accountants' that, I suspect, play a numbers game - file anything and duck when something comes back.. The system is very poorly policed. On top of this taxpayers are actively encouraged, by HMRC and latterly the accounting software companies, to go it alone, despite the fact that it can be complex, resulting in another raft of poorly prepared tax returns. I don't think they're [HMRC] really bothered. Everything is viewed at a macro level nowadays, with insufficient resources to dig into the detail.
There may not be an appetite for it but I'd venture that making it a legal requirement that all businesses in whatever UK form must be registered and publish ownership and trading address details would be an even better idea.