There has been some discussion over the last couple of years concerning a desire by HMRC to regulate tax advisors. This appears to have gone quiet for now but on 3rd August HMRC published a report outlining the standard it expects/requires from agents.

The basic requirement is that HMRC expects agents to be honest and straightforward with them. This means quite simply that an agent should always disclose all relevant information to HMRC and not be in any way devious, evasive or uncooperative.

The report advises that agents should not imply that they are regulated for tax by HMRC – I have heard a number of amusing stories from HMRC officers concerning agents seeking to attract business by telling prospective clients that they can trust them because they are regulated by HMRC! Any agent attempting to do this will be quickly admonished by HMRC and most likely HMRC will take a close look at the quality of the agent’s work as anyone who feels he has to claim that he is effectively approved by HMRC is possibly hiding a degree of incompetency.

The report goes on to say that HMRC expects agents to keep their technical knowledge up to date in the areas of tax which will affect their clients. This is a pretty wide-ranging requirement as for the general practitioner there is an enormous amount of legislation which he must be aware of and these days it does tend to change quite rapidly at times. One suspects that there may be some difference in what HMRC expects compared to what an agent feels is sufficient!

Agents are expected to advise clients to rectify errors in their tax affairs where they have been identified and the inference from the report is that HMRC will not be impressed if an agent should have identified an error or indeed a disclosure but has either ignored it or not contacted HMRC about it under instruction from the client.

This can be an area of difficulty for some agents. Clients expect their agent to advise them as to how they can keep their tax liability to the bare minimum and there are of course a number of legitimate ways to do this, for example maximising the amount which can be contributed into the client’s pension scheme.

However there are clients who will accuse the agent of working for HMRC rather than the client if the agent advises that a disclosure should be made or that an error should be notified to HMRC which will create a further liability to tax.

The agent is then in an awkward position. What should he do? Does he meet the expected standard required by HMRC and take the very real risk of losing what might be one of his biggest clients? In a small firm such a loss might lead to a significant reduction in the agents profit and consequently impact on his standard of living. The client might spread the word that the agent sides with HMRC rather than the client and further or future business might be lost.

All very difficult but the agent really has no option but to fulfil his obligations to HMRC as a professional advisor and if the client cannot accept good advice which will keep him out of serious trouble with HMRC then he must be allowed – indeed advised – to take his business elsewhere. HMRC is quite sensitive to sudden changes of agent and is well aware that such changes can take place because the agent has given advice which the client does not like. A change of this nature can attract the attention of HMRC and lead to an enquiry just to check that all is well.

HMRC expects agents to deal courteously and professionally with HMRC staff which is fair enough as the taxpayers charter promises that the same requirements are expected of HMRC staff in their dealings with taxpayers.

The report concludes with agents being advised to consider their own reputation when advising clients in the area of tax planning schemes which does of course include tax avoidance schemes. HMRC has really clamped down in this area over the last 10 years and any tax planning these days should be solid, based on a realistic understanding of the legislation and based on facts rather than a contrived scenario. Good tax planning is still possible – what HMRC is seeking to do is stop agents from devising a false or partially false set of circumstances which may lead to a reduction in tax liability.

All agents should read this report as it could have a huge impact on their future business. Agents who are obstructive when dealing with HMRC can expect to be called to a meeting to discuss their conduct and could possibly be warned to improve or face coming under close scrutiny when submitting anything to HMRC in the future.

We are happy to give guidance to agents who have any concerns.

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