Professional standards, tax advice and PCRT
We highlight the importance of ICAS professional standards and the requirements of Professional Conduct in Relation to Taxation (PCRT).
Improving standards in the tax advice market
The government and HMRC have been running a work programme on improving standards in the tax profession since 2020. There have been three important consultations, to which we have responded:
- 2020 - Call for evidence: Raising standards in the tax advice market
- 2021 - Consultation: Raising standards in the tax advice market: professional indemnity insurance and defining tax advice
- 2022 - Consultation: Raising standards in tax advice, protecting customers claiming tax repayments
After the 2021 consultation, the government decided not to proceed with the proposal for mandatory professional indemnity insurance for tax advisers. However, in 2023 we have seen significant actions taken to address the problems identified with some repayment agents, including the prohibition of the use of assignments of income tax repayments and the publication of HMRC’s updated standard for agents.
HMRC’s standard for agents
The standard for agents sets out the behaviour HMRC expects from tax agents and tax advisers, and gives an overview of the way HMRC will tackle the minority of agents who do not meet the standard. It was first published in 2016 and applies to all agents. The updated version now includes detailed transparency requirements (including a requirement to agree terms of engagement with a client in writing before starting to act) and has been brought into closer alignment with PCRT.
What’s next on improving standards?
We have been expecting a further consultation on possible regulation of the tax profession (including a definition of tax advice), since autumn 2022. This may be published later this year, so now is a good time to highlight the importance of ICAS professional standards and the requirements of PCRT.
Where do ICAS members fit in?
Part of being a member of a professional body is about achieving, and maintaining, standards – both technical and professional.
ICAS members are bound by the Code of Ethics which sets out the five fundamental principles of professional ethics for all professional accountants:
3. Professional competence and due care
5. Professional behaviour
When it comes to advising on tax, PCRT sets out the fundamental principles and standards of behaviour that all members, affiliates and students must follow.
Tax advisers operate in a complex business and financial environment. A core purpose of the tax system is to fund public services and to contribute to the good health of our economy and society. Tax advisers therefore have a responsibility to serve their clients’ interests whilst upholding the profession’s reputation and taking account of the wider public interest.
What is PCRT?
PCRT has been revised over the years in response to changing circumstances. It now consists of:
- The core PCRT document, which is mandatory
- Help sheets which provide guidance on how to apply PCRT; they are designed to be practical and to offer best practice in relation to:
PCRT Help sheet A – Submission of tax information and ‘tax filings’
PCRT Help sheet B – Tax Advice
PCRT Help sheet C – Dealing with errors
PCRT Help sheet C2 – Dealing with errors - members in business
PCRT Help sheet D – Request for data by HMRC
PCRT Help sheet E – Members’ Personal Tax Affairs
- Topical guidance - Topical guidance covering the application of professional standards to the provision of R&D tax credit services.
HMRC acknowledges that PCRT is an acceptable basis for dealings between members and HMRC.
Following PCRT requirements and guidance should support members in their work and help to protect them from complaints, both from clients and HMRC. On a positive note, PCRT guides members in their behaviour, assists them and ensures that they undertake work effectively and appropriately.
We take a more detailed look at the components of PCRT later in this article.
Keeping PCRT up to date
ICAS is a member of the group of representatives of the seven professional bodies that subscribe to PCRT. We meet regularly to keep the guidance up to date and to refresh it when necessary to deal with changing circumstances.
Much thought and proactive work goes into PCRT, with ongoing engagement with HMRC, particularly contributing to the work on improving standards in tax advice and possible regulation of the tax profession.
During 2023 we took part in discussions with the PCRT group and the Global Accounting Alliance tax working group about the IESBA exposure draft ‘Tax Planning and Related Services’ and submitted an ICAS response to IESBA.
Maintaining standards and common problems
The ICAS Tax team receives tax queries from members, often when something has gone wrong. The most common features of these queries are issues of professional competence and taking due care. Maintaining technical standards requires keeping up to date with developments and legislative changes in the adviser’s specialist areas. It is equally important to recognise when a matter is outside the adviser’s competence, to know when not to advise, and to be willing to say as much to clients.
We ask members to be mindful of PCRT in all their work. If you have any queries about PCRT, please contact the helpdesk.
The core PCRT document, which is mandatory, comprises five fundamental principles and five standards for tax planning.
The fundamental principles
A member must comply with the fundamental principles:
To be straightforward and honest in all professional and business relationships.
To not allow bias, conflict of interest or undue influence of others to override professional or business judgements.
Professional competence and due care
To maintain professional knowledge and skill at the level required to ensure that a client or employer receives competent professional service based on current developments in practice, legislation and techniques and act diligently and in accordance with applicable technical and professional standards.
To respect the confidentiality of information acquired as a result of professional and business relationships and, therefore, not disclose any such information to third parties without proper and specific authority, unless there is a legal or professional right or duty to disclose, nor use the information for the personal advantage of the member or third parties.
To comply with relevant laws and regulations and avoid any action that discredits the profession.
The standards for tax planning
A member must observe these standards when advising on UK tax planning:
Tax planning must be specific to the particular client's facts and circumstances. Clients must be alerted to the wider risks and the implications of any courses of action.
At all times members must act lawfully and with integrity and expect the same from their clients. Tax planning should be based on a realistic assessment of the facts and on a credible view of the law. Members should draw their clients' attention to where the law is materially uncertain, for example because HMRC is known to take a different view of the law. Members should consider taking further advice appropriate to the risks and circumstances of the particular case, for example, where litigation is likely.
Disclosure and transparency
Tax advice must not rely for its effectiveness on HMRC having less than the relevant facts. Any disclosure must fairly represent all relevant facts.
Advising on tax planning arrangements
Members must not create, encourage or promote tax planning arrangements or structures that: (i) set out to achieve results that are contrary to the clear intention of Parliament in enacting relevant legislation; and/or (ii) are highly artificial or highly contrived and seek to exploit shortcomings within the relevant legislation.
Professional judgement and appropriate documentation
Applying these requirements to particular client advisory situations requires members to exercise professional judgement on a number of matters. Members should keep notes on a timely basis of the rationale for the judgments exercised in seeking to adhere to these requirements.
Let us know your views
ICAS responds to many tax calls for evidence and consultations, as well as producing tax policy papers and reports. We also regularly attend meetings with HMRC at which service levels, delays and other issues are discussed, and we raise problems being encountered by members. We welcome input from members to inform our work; email email@example.com to share your insights and feedback.