The Chartered Institute of Taxation (CIOT) has given a cautious welcome to a government proposal for an ultimate legal requirement for anyone who wants to provide tax advice on a commercial basis to belong to a recognised professional body. The CIOT said an alternative proposal for a new government regulator of tax advisers would be costly and ineffective. The Institute was responding to a HMRC call for evidence on options to raise standards in the market for tax advice to benefit taxpayers and to better protect the public purse.1
The CIOT backs an option that recognises the good work that many professional bodies such as CIOT do to maintain standards. Under this option there would ultimately be a legal requirement for anyone who wants to provide tax advice on a commercial basis to belong to a recognised professional body. To ensure high standards, the Government could set out the criteria by which a professional body would be recognised as providing the necessary high standards for inclusion.
John Cullinane, CIOT Tax Policy Director, said:
“There is the risk of excessive disruption to the tax system if agents and advisers who are not members of a recognised professional body are outlawed overnight. We suggest a transitional period - which might involve a possibly escalating level of requirements common to professional body members being applied to this population - to allow existing unaffiliated agents to adapt. An early requirement might be for all tax advisers to have professional indemnity insurance - as professional body members already do - which seems a very basic level of protection for the customer.
“HMRC acknowledge that most behavioural problems they encounter by tax advisers are not by members of professional bodies. We call on HMRC to publish far more of its data on tax advisers because we know very little about the population of advisers outside professional bodies. We understand from HMRC that they represent 30 per cent of tax agents but are responsible for most behavioural issues they encounter."
One of a handful of options HMRC are also considering is to require anyone who wants to provide tax advice by way of business to register with a new government regulator before they could operate in the market. Advisers must satisfy a fit and proper person test in order to register (this test will include possessing relevant qualifications or experience of professional practice and not having been subject to a penalty for promoting or enabling tax avoidance, for example). Advisers who were admitted to the register could be subject to regular reviews of their continuing fitness and propriety, with appropriate enforcement action taken against those that breach standards.2
John Cullinane said:
“A Government regulator risks being costly and ineffective. There will be registration and supervision costs alongside professional body membership, costs which will likely be passed on to the customer. The standards that would be imposed are in general lower than those already required of professional body membership. In short it will ignore what has been achieved in recent years by professional bodies working together and with HMRC to raise standards – and in some respects might serve to undermine it because those interested in cutting corners will be able to buy a veneer of respectability through registration without conforming to higher professional standards. This option would not, on the terms in which it is explained by HMRC, apply to promoters of tax avoidance who avoid giving ‘advice’ and merely provide avoidance structures. A wider question is, is it appropriate for the State, which exercises a coercive power to require its citizens to pay tax, also to regulate directly those whom the taxpayers have engaged to help them with their tax obligations?”
The CIOT also calls for action in two other areas.
John Cullinane said:
“Significant numbers of people are not used to using tax advisers on a paid basis and indeed do not have large incomes, but are nevertheless too high-earning to be eligible for help from the tax charities, who have to have a low cut off in order to ration their limited resources and direct their work to the people in greatest need. Although this is not a problem of unprofessional behaviour, it is a problem in the market and needs to be considered in designing solutions.”
Some taxpayers obtain tax advice from offshore. Offshore members of UK professional bodies who advise on UK taxation are bound by ethical rules. But this is unlikely to be the main part of the population operating offshore. There is a need for this area to be reviewed, comments the CIOT.3
Notes for editors
1. At the Budget in March the Government announced that it would be launching a consultation into raising standards in the tax advice market, as foreshadowed in its response to the independent review into the loan charge published in December 2019. HMRC believes many tax advisers are technically competent and adhere to high professional standards and are a very useful source of advice and support to taxpayers. But as the Loan Charge review highlighted, the market for tax advice is not working as well as it should be. ‘Some advisers are incompetent, some unprofessional, a few actively corrupt’, says HMRC. The CIOT’s response to the call for evidence is here.
2. This test could be applied to all agents who represented a client subject to UK taxation, including any adviser based outside the UK.
3. The CIOT says a solution may need to be as extreme as requiring any services in relation to UK taxation to be routed through a UK-based organisation in some way or another. Alternatively, the CIOT understands that the approach of Financial Services regulation is to make it an offence to give financial services advice ‘in’ the UK (which includes giving it electronically to someone in the UK) - that is, the focus is on the place where the advice is ‘consumed’. A similar approach could be adopted, namely that the giving to a UK person or company of advice in relation to UK taxes needed to be regulated (irrespective of the place from which the advice was given).
4. The Chartered Institute of Taxation (CIOT)
The CIOT is the leading professional body in the United Kingdom concerned solely with taxation. The CIOT is an educational charity, promoting education and study of the administration and practice of taxation. One of our key aims is to work for a better, more efficient, tax system for all affected by it – taxpayers, their advisers and the authorities. The CIOT’s work covers all aspects of taxation, including direct and indirect taxes and duties. Through our Low Incomes Tax Reform Group (LITRG), the CIOT has a particular focus on improving the tax system, including tax credits and benefits, for the unrepresented taxpayer.
The CIOT draws on our members’ experience in private practice, commerce and industry, government and academia to improve tax administration and propose and explain how tax policy objectives can most effectively be achieved. We also link to, and draw on, similar leading professional tax bodies in other countries. The CIOT’s comments and recommendations on tax issues are made in line with our charitable objectives: we are politically neutral in our work.
The CIOT’s 19,000 members have the practising title of ‘Chartered Tax Adviser’ and the designatory letters ‘CTA’, to represent the leading tax qualification.More Articles by Chartered Institute of Taxation (CIOT) ...