Raising standards in the tax advice market – LITRG response

This consultation discusses the government’s intention to raise standards in the tax advice market through a regulatory framework. Its sets out three possible approaches to strengthening the framework including mandatory membership of a recognised professional body.

LITRG’s submission supplements the main CIOT response and focuses on issues relevant to those on the lowest incomes. Most of our response is based on our recent work around High Volume Repayment Agents (HVRAs).

We are supportive of the proposed requirements for registration of agents and think that fit and proper checks should be incorporated as part of that.

Our response welcomes recent steps taken by HMRC in respect of HVRAs but notes that HMRC were slow to respond to issues. We also question whether the government have fully identified and understood all issues in the tax advice market and state that more work is needed to get a deeper understanding of the problems the consultation is seeking to address.

We support CIOT’s view that approach 1 (mandatory professional body membership) is the most desirable of the 3 options – subject to the need for further detail as the policy progresses. However, we also highlight that there may be consequences of this model in terms of unaffiliated agents exiting the market and costs that may be passed onto consumers – although these concerns should not prevent any changes from being made, they do need to be understood and considered as plans develop so any mitigations can be designed.

Mandatory professional body membership is unlikely to solve all of the problems set out in the consultation document and we are concerned that some HVRAs may look to change practices to get around any regulatory requirements. Without effective enforcement, the objectives outlined in the consultation would be undermined and if the consequences of continuing to give advice outside of the regulatory framework are not sufficiently serious, then there would be no deterrent. We think that HMRC are best placed to identify and sanction those outside of a professional body who have not dealt with regulatory requirements and require criminal sanctions.

Finally, we highlight the need HMRC to supplement any approach with a structured initiative to expand and enhance the provision of not-for-profit tax advice and consider how HMRC can monitor and improve other sources of advice and support relied on by unrepresented taxpayers. We also note that any change is likely to take some time and in the interim HMRC must continue to look for ways to raise standards and act quickly to protect consumers within the current framework, for example by legislating to close down abuses around electronic signatures.