Following a consultation on raising standards in tax advice and protecting customers claiming tax repayments, HMRC will strengthen their ‘Standard for Agents’ and set new rules for tax refund agents. These are to ensure that their customers do not accidentally sign up to unfair contract terms, which can allow the tax agent to claim a large cut of any tax refund claimed.
HMRC have published a summary of responses to their consultation on 'Raising standards in tax advice: protecting customers claiming tax repayments'. It now intends to take steps to tackle the issues outlined in the consultation to help restore taxpayers’ confidence in the tax advice market. This will include:
- Legislation to stop the use of legally binding ‘assignments’ as part of claiming an Income Tax repayment.
- A new HMRC registration process for repayment agents to make the agent sector more transparent so customers better understand what they are signing up for.
- New transparency requirements for agents in the HMRC's Standard for Agents.
- Exploring the introduction of mandatory pre-contractual disclosure forms and strengthening checks on repayment agents.
- Undertaking further work to strengthen the evidence that a claim has been made with a customer’s consent before processing it and improve the way in which customers authorise their agent.
HMRC notes that it can limit an agent’s access to online services or block that access altogether.
Further action may also be considered, ranging from dialogue with the agent to statutory powers (including criminal investigation and prosecution).
Other actions may include:
- Disclosure of misconduct to any professional regulatory body an agent is a member of, under section 20(3) of the Commissioners of Revenue and Customs Act 2005.
- Dishonest conduct notices and related file access notices, financial penalties and publication of any penalties imposed under schedule 38 of the Finance Act 2012.
- Refusing to deal with an agent altogether.
The Chartered Institute of Taxation (CIOT)'s Low Income Reform Group (LITRG) has been active in lobbying the government to clamp down on the use of assignments by tax refund companies.
John Cullinane, Director of Public Policy for the Chartered Institute of Taxation (CIOT), commented, “This looks a significant, and broadly positive step into the area of regulating tax agents from HMRC.
These changes are unlikely to impact much on tax agents who are members of professional bodies such as CIOT, as they are already subject to Professional Conduct in Relation to Taxation (PCRT), a stronger set of professional and ethical standards. However, they are a step forward in raising standards among those outside the PCRT bodies."
He added, "The Standard for Agents already broadly reflects PCRT as regards revenue protection – now HMRC intend to introduce some consumer protection elements as well. But the Standard still won’t go as far as PCRT on areas such as avoiding conflicts of interest and continuous professional development."
Victoria Todd, Head of the LITRG, said, “We welcome these additional steps, which show HMRC recognises the important role they play in consumer protection. Refund companies have a legitimate role in the tax system, but the practices of some of these companies in recent years have been unacceptable. The proposed changes will hopefully address problems around the use of assignments, increase transparency for taxpayers and set clearer standards for these companies’ behaviour."
Useful guides on this topic
HMRC's Standard for Agents
This is a non-statutory standard, aimed at all tax agents, although largely to most tax agents who are not members of any of the professional tax and accountancy bodies.
Professional Conduct in Relation to Taxation (PCRT)
Guidance for professionals is intended to advise and assist members of the relevant bodies in their professional conduct, particularly when it comes to relationships with clients and HMRC.
HMRC policy Approach to working with agents
HMRC consultation outcome: Raising standards in tax advice, protecting customers claiming tax repayments