Passing the buck?

This article was first published in Taxation magazine on 29 November 2022.

I read with interest the article in Taxation, reporting on a discussion on whether the Tax Advisory market is sufficiently regulated. This was particularly interesting as I recently attended a Parliamentary round table event regarding prosecution of promoters of tax avoidance schemes, where the APPG suggested that more regulation of the profession is necessary. A number of thoughts sprung to mind.

Firstly, by suggesting that we need more regulation, the implication is that tax advisers are ‘rogue’ and are not acting in the best interests of their clients. This is simply untrue in the vast majority of cases.

Secondly, tax advisers who come up with aggressive tax avoidance schemes nowadays tend to be those that are unregulated. Previously when avoidance schemes were par for the course and ok to use, regulated professionals would routinely get involved. Since this type of planning has become villified and the PCRT has been updated, “promoters of mass market avoidance schemes are rarely members of a professional body.” (Jim Harra, then Chief Executive and First Permanent Secretary HMRC). On the basis of that recognition, it seems counter intuitive and counterproductive to further tighten regulations.

Thirdly, looking now at the mindset of those who deliberately defraud their clients, in my view, it is unlikely that any level of regulation will prevent them from continuing to do so. Promotion and implementation of tax avoidance schemes is (was) lucrative work. In my experience, those who are promoting schemes are either aware they are unlikely to work and are making hay while the sun shines or genuinely believe the arrangements work. In relation to the latter, there is a chance the courts will accept the arrangements as legitimate (as happened recently in Altrad Services Ltd, Robert Wiseman and Sons Ltd v HMRC [2022] UKUT 185 (TCC)).

Mr Harra also made the point that “Unfortunately, a minority of tax agents don’t provide a good service to their clients. Some are professionally competent but push the boundaries of tax planning…” This is an extremely subjective statement and I can say so objectively, because my job is picking up the pieces IF the planning goes wrong.

Subjective statements (like ‘fair share’) should not come within the ambit of tax. Tax is an extremely political potato and if we bring morals into it, then no-one – advisers, taxpayers or HMRC – know where they stand. Joe Public, in moral outrage should not determine how the tax code works; the law and courts determine how the tax code works and HMRC’s remit is to uphold the law. It’s also interesting to note how despite throwing the phrase “fair share of taxes” around any time the department wins at Tribunal, HMRC is notoriously inconsistent with how it deals with different taxpayers in similar situations – Beardwood v HMRC (https://www.bailii.org/cgi-bin/format.cgi?doc=/uk/cases/UKFTT/TC/2018/TC06357.html&query=(title:(+Beardwood+))) is a classic example of this.

Blaming (the majority of) tax advisers where a few have given the profession a bad name is simply passing the buck. All the tax avoidance promoters and schemes that have been named to date relate to individuals who are self-employed. Essentially, it is a fallout of the IR35 legislation. We have identified where the issue is so rather than consider whether more regulation is going to prevent the unregulated from promoting such arrangements, perhaps it is time to amend and simplify the relevant tax code.
And if we are going to bring morals into tax – is it the government’s moral responsibility to do so, to protect the taxpaying public and the purse of UK Plc?

Finally, one point that I have not seen in any number of discussions about regulation is a suggestion that we protect the term “Tax Adviser”. The term ‘Architect’ is protected and only someone who is on the Architects Register can describe themselves as such. The Architects Registration board makes the point that “Only ‘architect’ is protected in this way, the protection doesn’t apply to terms like ‘architectural consultant’ or ‘architectural assistant’.” Similarly, I presume “tax consultant” or “tax assistant” would be unprotected unless specified – something to consider.

The premise is straightforward; anyone who is regulated by one of a list of professional bodies, should be able to call themselves a Tax Adviser. It should be simple enough to be able to collate the registers already held by the registered bodies. Anyone who is not registered should be able to provide some services (e.g. filing tax returns), but the permissible services should be limited in scope – and I am aware there may well be dissenting opinions on this!

Where there are (e.g.) accountants who wish to also provide tax advice, the accounting bodies may consider an exam to determine whether the individual has sufficient experience and knowledge to be a tax adviser. This might sound onerous, but no doubt the vast majority of accountants would pass with flying colours and there would be no issue after the initial furore has died down.

The ‘Tax Adviser’ register should be publicised and made available to the public.

By way of real life and current example, I know of a law firm requiring their employees to take one particular STEP exam to ensure they know in detail the areas they will be expected to cover. There is no need to do the full qualification, but passing this one exam gives the lawyers confidence in their own abilities and clients are no doubt reassured as well.

It would be interesting to hear other people’s thoughts on this. Do we really need further regulation of the tax advisory profession? Or is there a way to remove the root of the problem rather than treating the symptoms?

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