CTA Address 2020: Professor Mayson says overriding objective of regulation should be the public interest

A video of Professor Stephen Mayson's speech is on YouTube - here

Professor Mayson opened his address by identifying what he saw as the principal flaws and shortcomings in the current regulatory framework. They derive from the structure of the Legal Services Act 2007; these include inflexibility arising from statutory prescriptions, competing and inappropriate regulatory objectives and a pivotal set of reserved legal activities that are ‘anachronistic and distort the approach to activities that ought to be regulated’. The current regulatory structure is ‘an incomplete and limited framework for legal services regulation that is not able in the near-term and beyond to meet the demands and expectations placed on it’.

Professor Mayson said the overriding objective of regulation should be the public interest, that the scope of regulation should be extended to include all ‘providers’ of ‘legal services’, including those who are currently unregulatable as well as providers of lawtech, and there should be an independent, single, sector-wide regulator of legal services (the Legal Services Regulation Authority, or LSRA). LSRA would maintain a public register of providers, minimum conditions of registration would require common standards and disclosures and the current reserved activities should be replaced with a requirement for prior authorisation in order to secure the public interest. He added that professional titles should not be the only route for entry by individuals into legal services regulation.

Professor Mayson ventured some thoughts about how such an approach to regulation might affect tax practitioners, with two caveats: the first is that his report envisages an exemption for any services, including tax advice, that are ‘subsidiary but necessary’ to the provider’s main business; and the second caveat is that the principal purpose of registration is for the information and protection of individual consumers and small organisations.

On personal regulation of individuals, Professor Mayson said that qualified lawyers who are tax advisers would need to be registered and authorised personally if they conducted tax advocacy or litigation.  They would also need to be registered and accredited to the extent that the LSRA required accreditation for all or some aspects of tax advice. Depending on the nature of the advice and any specialisation involved, that accreditation could in his view potentially come from bodies such as CIOT. Their accreditations should be available more widely than their own membership. Similarly, accountants who are tax advisers would also need to be registered and authorised by the LSRA if they conducted tax advocacy or litigation. The potential difference for accountants in relation to non-contentious tax advice could arise from the LSRA’s power to recognise alternative regulatory arrangements.

Chartered tax advisers would be considered a provider of legal services and would have to be registered, said Professor Mayson. He suggested CIOT and ATT would wish to provide the appropriate routes to authorisation or accreditation for their members. He added: “It would be possible in my view, if they wished, for them to be professional bodies whose rules for the award and retention of their respective titles could be approved by the LSRA. It is also possible, given the highly specialist nature of the work, that designated body status with delegated regulatory powers could be achieved.”

He spoke about potential treatment of recognised tax agents who are not affiliated to any professional body. Such a tax agent would still need to be registered and, for instance, carry a defined minimum level of indemnity insurance. He said: “It might be that CIOT or the ATT might wish to provide appropriate programmes for accreditation for tax agents.”

Professor Mayson explained the new approach is designed to apply to legal services provided through technology where no other regulated person is involved in provision or referral.  It is not, however, intended to capture technology that is simply a source of information.

In addition to personal registration in respect of higher risk legal services for which prior authorisation or accreditation is required, the registration of a firm or other entity through which tax advice is provided would also be necessary under the core proposals in the report.

In closing comments, Professor Mayson accepted that the collection of tax that is legally due is a legitimate aspect of the public interest, the state’s interest in that is not, of itself, for him a sufficient reason for using legal services regulation to secure the protection of tax revenues.

Explaining why there is not anything specifically in the report about the promotion of tax schemes and tax avoidance, he suggested dealing with them is a wider matter for tax legislation and enforcement powers, and therefore again not specifically for the regulation of legal services.

The CTA Address was held 'virtually' on 2 July 2020 because of the ongoing COVID-19 pandemic. The event chair, CIOT Deputy President Peter Rayney, invited Professor Jane Frecknall-Hughes, Professor of Accounting and Taxation at Nottingham University Business School, and Sir Edward Troup, former chief executive of HMRC, to respond to Professor Mayson’s address.

Professor Frecknall-Hughes said that the devil would be in the detail of how oversight would apply. The aim of separating representation from regulation/discipline in practice might see the latter referred to the professional bodies if processes are robust, with the potential for creating confusion. She observed that tax as a work domain is different from many others, and does not meet the traditional definition of a profession on many levels (maybe reflected in the many different terms used to describe practitioners). She later said her work for Tax Help for Older People has highlighted to her issues with levels of competence and quality of service in some cases in relation to HMRC. On a wider point, she complained about the lack of information available and shared on how other countries regulate their tax professions.

In his remarks, Sir Edward accepted there is a problem with lack of regulation of some in tax practice but suggested it was no bad thing for this issue to continue hanging over the profession like a Sword of Damocles to keep everyone on their toes. HMRC have not wanted to take on role of regulator of tax profession because their main role is being accountable to the Treasury for money coming in. Sir Edward said ‘good’ looks like a world where there is adequate redress for the individual. We should be careful whatever we do with regulation is proportionate to the risks, he said. He warned that all regulation carries the risk of ‘box ticking’ and can fail, and the cost of regulation will fall on consumers. There will always be people outside the regulatory market, he mused. He said there is a lot of co-operation between countries on offshore promoters and he is in favour of naming and shaming overseas tax agents and promoters who go against the public interest in the UK.

Professor Stephen Mayson's speech can be read here.

By Hamant Verma