HMRC have published a response to their consultation ‘Raising standards in the tax advice market – strengthening the regulatory framework and improving registration’. This outlines potential approaches to strengthen the current regulatory system and tackle non-compliance in the tax advice market, including mandatory membership of a recognised professional body.
The government considers that the standard of tax advice given to the public by tax agents is highly variable and this can result in many taxpayers failing to receive the level of advice that is needed to comply with HMRC standards.
It notes that a minority of tax practitioners cause harm, to their clients and to the wider tax system. This might be the result of a lack of competence or due care, or in some cases active malicious intent.
HMRC estimates that one-third of tax agents are not affiliated to a professional body.
The government's aim is to bring in changes that will allow HMRC to monitor non-compliant behaviour in the tax advice market, strengthening the framework and assisting taxpayers to get their tax right first time with the use of trusted and compliant tax practitioners.
A Consultation ran until 29 May 2024 and resulted in 426 written responses. In response, the government has announced changes that will be put in place to allow HMRC to scrutinise non-compliant tax practitioners and raise the standards of the tax advice market.
The original consultation outlined three possible approaches:
- Mandatory membership of a recognised professional body.
- Joint HMRC-industry enforcement (‘hybrid’ model).
- Regulation by a government body.
Response summary
- A large number of respondents indicated that the current framework lacks deterrents for non-compliance, allowing practitioners to continue to operate even after they are removed from their professional body.
- The majority of respondents welcomed government intervention to raise standards but some were concerned with the burden of additional registration requirements.
- It was generally supported to mandate the registration of tax practitioners interacting with HMRC and introduce additional checks for registration.
- The majority of respondents agreed that this should apply to all practitioners interacting with HMRC, with a small number highlighting that this may be too inclusive bringing solicitors and similar professionals into the scope of registration.
- It was generally accepted that mandatory registration with HMRC was a crucial step in tackling non-compliant behaviour, with checks being put in place at the point of registration to ensure firms are compliant. There were varying views on how far these checks should extend.
- Mandatory registration of a recognised professional body was thought to be the best solution for tackling non-compliance as this would ensure entry requirements into the professional body were met and compulsory Continuing Professional Development (CPD) requirements were adhered to.
- Responses from non-affiliated practitioners leaned towards regulation by a government body as they did not believe membership of a professional body would guarantee high standards.
- There was limited support for a joint HMRC-industry approach to govern any non-compliance with respondents concerned that HMRC may enforce their own interpretation of tax law onto practitioners.
- There was broad support for the changes to apply to the tax advice market as a whole as opposed to containing any limitations to only those who liaise with HMRC.
Next steps
- From April 2026 it will become mandatory for practitioners who interact with HMRC on behalf of a client to register with HMRC.
- HMRC will apply checks to all tax practitioners who register.
- This comes with reassurance from the government that funds will be spent to ensure an easy-to-use service is available for the registration process.
- More details will be published prior to Budget 2025.
- There will be changes put in place for tax practitioners processing repayment claims on behalf of clients.
- Practitioners will be required to obtain an 'advanced electronic signature' from the client before submitting the claim to HMRC.
- This practice will commence on 6 April 2025 and will apply to R40, P87, and marriage allowance transfer forms.
- Non-compliance within the industry will also be targeted with ‘specific proposals to enhance HMRC’s powers’. Further consultation will be published in due course with the aim to implement changes from April 2026.
- Due to the concerns raised regarding the burden which may arise with regulatory intervention, the government aim to continue working towards options to strengthen the regulatory framework.
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