Taxation logo taxation mission text

Since 1927 the leading authority on tax law, practice and administration

Put your hands up!

28 June 2011 / Mike Truman
Categories: Comment & Analysis
HMRC do not want to directly regulate agents, MIKE TRUMAN explains


  • HMRC are not proposing themselves as regulator of the tax profession.
  • Feedback wanted from unqualified agents on why they do not join a professional body.
  • Who should be ‘qualified’, and by what sort of institute?
  • Better safeguards needed before HMRC refuse to deal with an agent.

We have already had some replies to our issue from three weeks ago devoted to the new consultation document, Establishing the Future Relationship Between the Tax Agent Community and HMRC. There is plenty of time for you to add your opinions by completing our online survey, or by sending in the pull-out response form included in the 9 June issue.

Remember that we will be gathering together all the responses we receive into a formal submission to the consultation document from Taxation; the more responses we get, the more comprehensive we can be.

HandsThe consultation covers a number of interconnected areas, but one has dominated the discussion so far – not so much here at Taxation, but certainly elsewhere. That is the issue of agent governance, which is what I want to concentrate on in this article.

HMRC regulation

The debate seems to be fixated on the question of whether it would be right for HMRC to regulate agents. Which is odd, because that is the one thing the consultation document makes it clear HMRC do not want to do. They see their role as identifying agents who do not seem to be meeting the standards of a competent agent, and then supporting them with information and advice:

‘HMRC believes that structured self governance of the tax agent market is the correct model for a future relationship. Identification of agents by HMRC whose level of performance falls below that which we would expect from a competent agent should help to provide the appropriate and necessary assurance that (taken as a whole) the customer could have confidence in the quality of work undertaken by the tax agent community’ (emphasis added).

Qualified or unqualified?

The consultation document does, however, reignite the issue of qualified and unqualified agents. The consultation document claims, rather surprisingly, that

‘The UK tax agent market is (as far as HMRC can establish) unique in that it is not regulated to conduct tax business.’

It would be interesting to know from those with experience of other jurisdictions whether this is really true, but it is frequently the case that the UK has what most countries would consider to be a remarkably lax attitude to qualifications for setting up in a particular trade or profession.

As I said three weeks ago, this is not a rerun of the sterile debate as to whether unqualified agents are competent; rather it is about how they prove themselves to be competent, and who regulates them if they fall short.

Again, I would stress that HMRC seem to be particularly keen to not become the regulator of the profession, not even of those who are currently unqualified. Instead, HMRC seem to want all agents to be members of a body which will take responsibility for their competence, and will deal with complaints that they are not. Even here, HMRC seem to be open to a conversation.

The consultation document recognises that:

‘Those who choose not to undertake formal examinations or become members of a recognised body may have very clear reasons for doing so and may be able to meet their competence and ongoing professional development needs through other routes.’

HMRC would therefore like to have feedback from that 30% of agents who are not qualified about why they have not taken examinations and have not joined a professional body.

Time to join

The option of requiring anyone who acts as a professional agent to pass exams is certainly a focus of the consultation paper, much as it tries to avoid being prescriptive. So there is a discussion about how long agents should be given to gain a qualification if it is made mandatory.

Not specifically discussed in the paper, but shown as a question, is whether HMRC should recognise a lower level of qualification such as that of ‘bookkeeper’ which would allow the agent to submit self-assessment returns on behalf of clients but not to access self-service.

This all raises more questions than it answers, however. To begin with, exactly who needs to be qualified? The consultation document recognises that a firm would ‘maintain a formal qualification (through individual members of staff)’, but precisely which members of staff?

Would it be enough for, say, a tax manager to be qualified, while the partners in the firm were unqualified? Would that really be a sufficient level of governance, given that he or she would be an employee whose employers were not subject to professional oversight, and yet were the ones who ran the practice?

The other major question is which qualifications would be acceptable. Clearly the major institutes’ exams and governance would be sufficient, but what about those which have only recently imposed examination regimes? Would the members who were already members prior to that be accepted as competent?

And what level of oversight would be required by such an institute? The consultation document notes with approval that the major tax and accountancy institutes have signed up to a common code of ethics, but would that be a requirement of being accepted as a suitable overseer in a regulated profession?

And what about the disciplinary process – after all, a code of ethics which is not enforced is just so much waste paper. There is a danger that the qualified versus unqualified debate will overshadow some of the more practical issues which need to be teased out of the consultation document.

The last resort?

There are only two paragraphs in the consultation document which suggest any intention of regulating agents directly. These refer to HMRC’s role as the regulator of last resort for money laundering, and in particular to the responsibility they have for regulating those who resign or are expelled from a professional body.

It might be possible to interpret this as suggesting that they would perform a similar function for those wanting to be tax agents who were expelled from their institutes, but the consultation document is careful not to say so.

The more problematic ‘last resort’ is the one raised by their comments on refusing to deal with agents. It is worth quoting at some length the relevant parts of the consultation:

‘In a small number of cases, the agent’s behaviour can be such that HMRC can no longer deal with them on these terms, for example where an agent has a record of behaving in an unprofessional manner, verbally abusing HMRC staff, and at the extreme, where an agent acts dishonestly in a more structured way. HMRC has exercised this judgment on the authority of the Commissioners of HMRC very infrequently, but in the most serious of cases it has withdrawn permission for an agent to do business on behalf of their clients with the department.’

It goes on to say that they will only do so where such a decision is ‘necessary, relevant and proportionate’, and that they will publish procedural guidance on the process ‘in the light of recent developments’.

Those recent developments are, of course, the judicial review hearing R (oao Lunn & Ors) v HMRC, [2011] EWHC 240 (Admin) and subsequent developments, which have been reported previously in Taxation.

Again, it is important that this issue is adequately covered in responses, and is not ignored because of the attention paid to the issue of regulation. Until that case, very few agents had realised that there was any prospect of their business being effectively destroyed by HMRC refusing to accept them as an agent.

While it is true that the power has been used extremely sparingly, and only after consideration at the very highest level, ‘necessary, relevant and proportionate’ is not a particularly specific test. We need far more than ‘procedural guidance’ to reassure us, we need to consider a proper system of clear and objective criteria that can be applied in making such a significant decision.

Influence your future

I make no apologies for having returned to this subject, probably not for the last time either, because I really do believe it has the potential to be the biggest change in the way the tax profession operates since self assessment.

But if we are going to get it right, we need to get past the bogeyman of HMRC as regulator for the whole tax profession. I don’t believe it is what they want, and I can assure you that if that is what they eventually propose, Taxation would oppose it.

So let’s take HMRC at their word for the time being, and genuinely engage with the other significant issues raised by the consultation document. I look forward to seeing your replies.

Categories: Comment & Analysis
back to top icon