Compulsory sign-up to professional body not a “silver bullet” to rogue advisers

The Institute has welcomed the spotlight on raising standards across the tax advice market and has responded¹ this week to a HMRC consultation² on the issue. 

The HMRC consultation notes that the majority of tax advisers are highly competent, act with integrity and play an important role in helping people get their tax right. However, it also highlights concerns ranging from practitioners showing a lack of competence to unscrupulous criminal actors – and that it is a surprise to many that there is no protection for consumers from anyone, qualified or not, holding themselves out as a tax adviser.

The consultation sought views as to possible models for regulation of the industry, rather than as to whether or not regulation was the best way to tackle the wide range of problems.

Alongside its support for requiring all tax practitioners to have to register with HMRC, the CIOT endorsed mandatory membership of a professional body as its preferred method for any future regulation, as the best way of building on professional body efforts to set and embed high standards in their membership. However, the CIOT has also expressed a number of cautions:

• Regulation is not a “silver bullet” – we need to better understand the problems to see where the need for supplementary action by HMRC would remain. And HMRC must play their part, including sharing more/better data, which only it holds, so that the professional bodies can see what HMRC are seeing as the harms, and target this behaviour.
• Regulation will take at least three years to design and implement – this cannot be a distraction for HMRC from acting urgently in the interim to clamp down on the most egregious harms.
• Costs and administrative burdens of the model must be, and remain, proportionate - good (possibly smaller) practitioners must not be priced out of the tax advice market and additional costs must not leave taxpayers feeling that they can no longer afford the help they need to get their tax right.
• Any decision cannot be made in isolation of decisions on the future model of Anti-Money Laundering regulation – which is still awaiting an outcome from HM Treasury since the consultation closed in September 2023.

Ellen Milner, the CIOT’s Director of Public Policy, said:

“We’re broadly supportive of approach one as the system which could be set up in the least amount of time and at the lowest overall cost. However, this is not a silver bullet and our support is subject to a need for further detail as the policy develops.

“HMRC’s expectations on what regulation means in practice are, as yet, unclear. Widespread reviews of technical work would require considerable investment in time and additional, suitably skilled resource. If this was the main enforcement method, in the early years it would require significant reliance on work done by firms themselves, which may not help build trust in the system.

“As they hold the data, HMRC are uniquely placed to pinpoint substandard work, egregious tax planning and common errors, and they will need to work collaboratively with recognised professional bodies to share information and intelligence to ensure efficient and targeted action can be taken.”

A survey of CIOT members, and those of the Association of Taxation Technicians, in April 2024, found that 84% thought regulation of the tax profession would improve professional standards, with 54% believing professional bodies should regulate the profession, compared to just 2% for HMRC.

The CIOT also questioned what steps would be taken to tackle the worst cases while the new regulatory model is being set up.

Ellen Milner added:

“None of the regulatory proposals will fully address the wide scope of the problem. In the most egregious cases intervention cannot wait for the implementation of regulation, which is still at least three years off.

“Developing the standards required for regulated professional bodies would take time and work would need to be done to ensure the rules applying to different bodies are consistently high.”

Notes for editors:

1. CIOT response to the HMRC consultation.
2. HMRC consultation: Raising standards in the tax advice market.