HMRC's Summary of responses, ‘Raising standards in the tax market: professional indemnity insurance and defining tax advice’ reveals no plans to introduce compulsory Professional Indemnity Insurance (PII) and a desire to create a legislative definition of 'tax advice'.
Government considers that "there is a minority of incompetent, unprofessional and malicious advisers whose activities harm their clients, reduce public revenue, and undermine the functioning of the tax advice market."
Following recommendations made by the Independent Loan Charge Review that the government should improve the market in tax advice and consider establishing ‘a more effective system of oversight, which may include formal regulation, for tax advisers’. The government has issued several calls for evidence (see Timeline tab) and in March 2021 issued a Call for evidence: ‘Raising Standards in the Tax Advice Market’ consulting on whether to introduce a requirement for those providing tax advice to hold PII, and to set out its plans to:
- Raise awareness of the HMRC Standard for Agents and review HMRC’s powers to enforce HMRC's Standard for Agents.
- Work collaboratively with professional bodies to understand the role they play in supervising and supporting their members and raising standards in the profession.
- Review options to tackle the high costs to consumers of claiming tax refunds.
Responses to the consultation indicated that compulsory professional indemnity insurance would not be an effective mechanism to raise standards in the tax advice market, nor would it have a significant impact on consumer protection.
HMRC says that its next steps are to investigate how to satisfy three criteria, set by HMRC which together would drive up standards. These are:
1. Clarity on the standards required
The minimum standard must be set out clearly, with understood routes to be able to achieve it. For example, requirements that are related to the individual, such as fit and proper tests, codes of conduct, and conditions about the way the individual or firm goes about their business. This could include, for example, standards about transparency of pricing. The standard should not be optional.
2. Ensure transparency
Transparency is necessary so that taxpayers are able to make informed choices about choosing an adviser, and they understand the standards that apply to advisers.
3. Effective enforcement
The standard needs to be enforced, with effective monitoring and clear consequences where standards are breached.
The government is intending to consult on further options that meet the criteria set out above.
The March 2021 consultation also asked for opinions about a definition of tax advice. This would be necessary for any intervention in the market, as it would set out to whom any new requirement would apply.
The new consultation, which the government expects to publish next year, will therefore also test a potential legislative definition of tax advice.
Other action underway to raise standards
HMRC says that it continues to act to raise standards and to target specific behaviours in the tax advice market. Some examples of this work are listed below:
- The government has recently introduced a number of powers to enable HMRC to take action more quickly to tackle promoters of tax avoidance schemes. Following the consultation on ‘Clamping down on promoters of tax avoidance’, the government also included a new provision in Finance Bill 2021 - 2022 to support taxpayers to steer clear of avoidance schemes or get out of avoidance quickly by sharing more information on promoters and their schemes.
- HMRC has worked with the ASA to issue a joint HMRC/ASA Enforcement Notice for misleading internet advertising of disguised remuneration avoidance. This allows the ASA to apply sanctions to promoters who continue to use misleading advertising including removing the advertisement from Internet searches.
- A wide-ranging consultation was published in March 2021 as part of a fundamental review of the current research and development (R&D) tax relief schemes. The scope of this review also encompassed the role of tax agents and intermediaries operating within the sector, with the shared aim of striving to raise the standard of advice provided to taxpayers.
In 2022, HMRC will update and publicise the HMRC Standard for Agents, and publish the conclusions of an internal review of HMRC’s existing powers to uphold agent standards.
To address concerns raised by customers and stakeholders in relation to repayment of tax refunds, the government also intends to consult next year on ways to tackle the high costs to taxpayers of claiming tax refunds.
Useful guides and links
Tax Agents: Raising standards in the tax market
November 2021: HMRC has published a Summary of responses ‘Raising standards in the tax market: professional indemnity insurance and defining tax advice’. HMRC has no plans to introduce compulsory PII but new measures must ...
Consultation: Raising standards in the tax advice market
March 2021: HMRC have published a consultation on the requirement for anyone providing tax advice to hold professional indemnity insurance. The consultation will also consider the definition of tax advice.
Raising standards in the tax market: next steps
November 2020: HMRC published ‘Raising standards in the tax advice market, Summary of responses and next steps’ in November 2020. It aims to raise standards, work with the professional tax bodies and root out advisers who are incompetent and those who actively bend or break the rules.
Call for evidence: Raising standards in the tax avoidance market
July 2020: HMRC opened a new call for evidence ‘Raising standards in the tax avoidance market’ which seeks suggestions on how to raise and maintain high standards of competence and behaviour in the tax advisory market.
HMRC's Standard for Agents
These standards are non-statutory and are aimed largely to be aimed at tax agents who are not members of any of the professional tax and accountancy bodies.
Professional Conduct in Relation to Taxation
At a glance' guide to the requirements of the Professional Conduct in Relation to Taxation (PCRT) adopted by the main professional accounting and tax bodies.
Tax Penalties for accountants, advisers and tax agents
What tax-related penalties can apply to accountants, advisers and agents?