ICAS response to proposals to increase HMRC’s powers for dealing with tax advisers

Susan Cattell outlines key points from the ICAS response to a consultation on additional HMRC powers, including our call for a requirement for all tax advisers to be qualified and belong to a professional body. We also want these proposals amended to ensure they can’t affect competent advisers.

A significant consultation for all tax advisers was published at the end of March. It asked for views on:

a)    Enhancing HMRC’s powers to investigate tax advisers where HMRC suspects their actions have led to an inaccuracy in a taxpayer’s document.
b)    Enabling HMRC to request information from tax advisers where HMRC suspects misconduct.
c)    Introducing stronger penalties against tax advisers who contribute to the tax gap.
d)    Publishing details of HMRC sanctions on tax advisers.
e)    Disclosures to professional bodies regarding concerns about their members’ activities that falls below the normal disciplinary investigation thresholds of professional bodies.

ICAS response

We submitted a detailed response to the proposals. Key points included:

We were pleased that the consultation rightly recognised that most tax advisers are competent and adhere to professional standards and add value to the tax system by supporting people to comply. 

We have extensive experience as a tax regulatory body over many years. Our members must meet various regulatory requirements (for example, they must have professional indemnity insurance and maintain professional knowledge through CPD) and are subject to a complaints and disciplinary process to deal with any complaints about incompetence and misconduct. 

We don’t have any evidence to suggest widespread concerns about the quality of tax practitioners licensed by ICAS both by reference to the lack of referrals from HMRC under the existing Memorandum of Understanding and the small number of regulatory and disciplinary orders we have applied.

However, we recognised that there’s a minority of incompetent, unprofessional, and unscrupulous advisers whose activities harm clients, reduce public revenue, and undermine the tax advice market. We supported action against these advisers. 

We noted our longstanding call for the introduction of a requirement for all tax advisers to be qualified and to be a member of one of the main professional bodies. It’s disappointing that in spite of majority support for this approach (in responses to the 2024 consultation on possible regulation of tax advisers), there’s no indication that it’ll be taken forward. In the longer term we believe that this would address many of the identified problems in the tax advice market.

We strongly agreed with the statement in the introductory section of the consultation that any changes to existing powers must ensure that two important principles are met, i.e. that:

• Tax advisers feel able to work with clients who find it difficult to comply; and
• there is recognition that mistakes can happen even when someone is acting to a high standard, and it must still be possible for advisers to get insurance to cover their work.

This requires that any enhanced powers are properly targeted, proportionate and include adequate safeguards. There must be minimal scope for unintended impacts on agents who do adhere to high professional standards (including Professional Conduct in Relation to Taxation). 

Our response commented that the details of proposals a), b) and c) above, need significant amendment. As they stand, they aren’t properly targeted on the minority of problem agents and could adversely affect a generally competent adviser who adheres to professional standards but who inadvertently makes a mistake. They could also deter good advisers from working with difficult clients.

Proposal d) to broaden the scope of publication of tax adviser details would also need some clarification and potential adjustment, to ensure that a balanced approach is adopted.

We were generally supportive of the proposals for broadening disclosure of HMRC’s concerns about tax advisers to professional bodies, subject to agreement of appropriate thresholds for reporting.

Let us know what you think

We respond to tax consultations and calls for evidence and attend meetings with HMRC at which service levels, delays and other issues you raise with us are discussed. We welcome input from members to inform our work; email us to share your insights and feedback.

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