The consultation document Establishing the future relationship between the tax agent community and HM Revenue & Customs, published on 31 May, follows in the trail of the 2008 OECD study into the role of tax intermediaries and the subsequent 2009 Working with Tax Agents consultation.
It builds on themes and ideas from both. In the introduction, HMRC endorse a key conclusion of the OECD study: that ‘tax advisers play a vital role in all tax systems, helping their clients understand and comply with tax obligations’.
The consultation explores how the relationship between agents and HMRC – and to an extent the relationship between agents, HMRC and clients – might change over the next few years. It contains some interesting ideas that will – or should – spark an important debate this summer.
At the heart of HMRC’s thinking is a proposition derived from the OECD study, that an enhanced relationship founded on trust, respect and professionalism could deliver benefits for taxpayers, agents and HMRC.
It is good to see some important principles explicitly acknowledged including, for example, that a client has the right to choose their adviser.
The consultation proposes that enrolled agents should be allowed to ‘self-serve’ in situations which are currently both labour and time intensive for agents and HMRC, significantly simplifying the associated processes for both parties.
There is a precedent here in electronic filing, which has for more than a decade allowed agents (and indeed taxpayers) to submit information directly into HMRC’s systems, removing the need for HMRC staff to re-key data, reducing costs and the scope for error.
A huge amount of information now enters HMRC’s systems without manual intervention or checking and extending this concept makes good sense. But did you notice the word ‘enrolled’?
HMRC’s motivation
HMRC’s wish to enrol agents appears to have two drivers. First, if enhanced access is being given to facilitate self-serve, it is understandable that HMRC will wish to know precisely who they are dealing with.
Second, HMRC say that they wish to monitor the performance of agents: the degree of controversy this proposal arouses will depend on the precise measures the department has in mind and the uses to which information will be put.
If there is to be any impact on individual agents or firms then a transparent and demonstrably fair process will be needed (which the consultation document acknowledges).
The information required for enrolment set out in the current document is very basic but includes, in addition to contact details for the firm, the agent’s personal UTR and confirmation that the agent has met personal tax filing and payment obligations.
Some will suspect the thin end of a regulatory wedge here. HMRC say, however, that they do not seek to directly regulate the profession or to change the relationship between the agent and the client and that they see value in the self-regulation role undertaken by professional bodies.
They go much further in fact and say that they consider that there could be value in all tax agent firms operating in the UK being expected to meet or exceed a minimum level of competence and professional conduct.
This leads on to a wish to explore the scope for requiring all tax agents to hold a relevant qualification to provide tax advice and to complete returns and claims on behalf of their clients and furthermore to consider the options for meeting professional development and governance needs ‘usually provided by a recognised institute or professional body’.
The idea of effectively requiring membership of a professional body is likely to prove controversial, but it is hard to see how else HMRC’s aspiration for structured self-governance of the tax agent market (which they believe is the correct model for a future relationship) could be delivered, unless HMRC assume a regulatory role overseeing unaffiliated agents as they do for money laundering.
What should the ‘minimum level of competence and professional conduct’ be? Requiring all agents to adhere to the joint professional bodies’ guidance Professional Conduct in Relation to Taxation could be a starting point, but agreeing what constitutes clear and credible evidence of an appropriate level of tax knowledge will be harder to agree. And then who will set the standards and how will they be enforced?
Very careful thought and a look at what has worked (and what has not worked) in other tax administrations will be needed. These questions will take time to explore – and even more time to answer.
Inevitable concerns
Attempting to change the existing relationship between HMRC and the profession will inevitably generate concerns, but there are potential cost savings for agents, their clients and for HMRC in the self-serve proposal. Defining a minimum standard of IT security for those agents wanting to use the enhanced facilities also makes sense.
The most controversial elements of the consultation will undoubtedly be the idea of an agent community in which all agents are members of a professional or regulatory body and the use to which the data HMRC intend to hold in respect of enrolled agents will, or could, be put.
I suspect, however, that most will prefer the idea of self-regulation to the potential alternative: direct regulation by HMRC. It will be an interesting debate and one that deserves the fullest possible engagement.
Paul Aplin
Tax Partner, A C Mole & Sons
Chairman, ICAEW Tax Faculty Technical Committtee
The views expressed here are the author’s own.
