HMRC has launched a new consultation: “Establishing the future relationship between the tax agent community and HMRC”.

This consultation is markedly different from the previous agent consultation in that there is a clear emphasis on harnessing the power of tax agents in order to streamline the tax system. This will be by introducing a self-serve mechanism.

The new consultation considers HMRC’s new agent strategy which envisages:

  • Secure enrolment and segmentation of tax agents to differentiate between those who are in business and those in the voluntary sector or acting on behalf of friends and family.
  • Reducing time and cost for all parties by making it easier for all agents to access the services they need and by increasing their ability to self serve on behalf of clients where appropriate.
  • Tailoring HMRC’s support services to paid, professional agents to reflect the compliance risks inherent in their client portfolio.
  • Providing additional support for agents whose own standards are below those expected.

Allowing agents to “self-serve” – i.e. go online and adjust, for example, a PAYE, is not revolutionary considering the work agents already perform online for their clients. However, for HMRC there are considerable risks in allowing every “Tom, Dick and Harry & Co” to register as a tax agent and so at this stage the consultation is very much about exploring who should be allowed to self-serve and how they can then be monitored.

The consultation moves into some darker areas, HMRC has come up with the idea of scoring tax agents’ ability against the compliance of their clients. This would be a bit like saying the client is bad at bookkeeping, therefore his agent must be too. Thus we move on the question of training, apparently the UK is pretty unique in allowing unqualified individuals to act as tax agents. However, the fact that someone is unqualified does not necessarily mean that their abilities will be less than someone who is qualified, or does it? We simply do not know as no one has the statistics. The odds are that unqualified tax agents are going to come out badly long term: they generally have no professional body to respond on their behalf and as such have no body to monitor their professional conduct.

This consultation does not consider penalties for dishonest tax agents. The previous consultation was little short of a “train crash” for HMRC: it had centered its attention on developing a new tax penalty system for agents. Unfortunately the draft legislation was so widely drafted that a tax penalty would apply to anyone giving any form of tax advice. The vexed question of fines for tax agents has not disappeared fully; HMRC is discussing elsewhere how it can tackle more effectively those few agents who are found to be acting dishonestly.

In summary, HMRC asks the following questions in the consultation:

Agent enrolment:

  • To which types of agent should the new enrolment process apply and why?
  • How should enrolment apply to multi-office/location agent firms?
  • Is the proposed ‘data set’ reasonable to provide?
  • Are there other elements of data that you believe would further substantiate the identity of a tax agent business?
  • The enrolment process could be introduced in several ways. How should it be rolled out, and over what timescale/at what point in the year?
  • Should re-enrolment be an annual requirement for all? If not, how should HMRC ensure that agents provide updates to the information when there are significant changes?
  • In addition to administrative burden savings, what other performance indicators should be used to assess the effectiveness of the proposed enrolment process?

On self serve:

  • Are the self service options identified those that agents would find most relevant or are there other transactions that should be included?
  • What safeguards should HMRC apply if agents are able to self-authorise to act on behalf of a client?
  • Would tax agents welcome the degree of control indicated and does this alter the potential relationship between agents and their clients should errors be made?
  • At what industry level should security requirements be set for office and IT processes?
  • Would you anticipate that your professional body can monitor/check the IT security and other requirements for HMRC to allow self service as part of the professional body assurance processes for members?
  • If you think it necessary or appropriate to restrict self serve access, what criteria, safeguards and transitional arrangements should be applied?
  • Are there any other aspects of the proposed self serve pilot that you think should be monitored or evaluated?

On understanding an agent’s engagement with HMRC:

  • What client and agent performance indicators would you suggest are used to inform HMRC’s 'agent view' and what should an acceptable level of performance be in each case?
  • What would be appropriate safeguards, and how should an agent be able to challenge HMRC’s views?
  • Would it be appropriate for HMRC to seek confirmation that a tax agent firm should hold and maintain a formal qualification (through individual members of staff) before allowing them to act in relation to tax matters?
  • Should HMRC recognise a less onerous standard of qualification with a proportionately reduced ability to transact with HMRC for example a recognised classification of ‘bookkeeper’ to enable the holder to submit Self Assessment tax returns but not access a self serve facility?
  • What would be an appropriate and reasonable period of time for currently unqualified tax agents to obtain a relevant tax qualification and what should the transitional arrangements be?
  • What advantages or disadvantages would membership of a recognised institute or body provide for HMRC and customers/clients?
  • What action/sanctions could be applied to those who act unprofessionally other than HMRC refusing to deal with them?
  • In the most serious cases how should HMRC best address their responsibility to take action against an agent by refusing to deal with them? Should that decision be informed by an independent panel?

On the assessment of impacts in the Taxes Impact Assessment:

  • What changes do you expect to make as a result of the proposals in this consultation document?
  • Do you have any views on the potential ‘one-off’ costs involved in making the changes?
  • What are your views on the anticipated ‘ongoing’ costs of the proposed changes and the impact of this on those you represent?
  • Do you consider that these proposals would have a disproportionate impact on smaller agent businesses, for example, those with less than 20 employees? How could these impacts be addressed?
  • Do you consider that these proposals would have a disproportionate impact on unqualified or unaffiliated agents? How could these impacts be addressed?

The consultation, “Establishing the future relationship between the tax agent community and HMRC” was published on 31 May 2011 and the closing date for comments is 16 September 2011.