Tax advice consultation: IFA

Originally launched mid-March, the “call for evidence: raising standards in the tax advice market” has been created to, among other things, identify the characteristics of good and bad practice in the sector, as well as possible approaches to raising standards. The call for evidence notes that while “many tax advisers are technically competent and adhere to high professional standards…the market for tax advice is not working as well as it should be. Some advisers are incompetent, some unprofessional and a few actively corrupt.” 

This was a conclusion drawn in the independent review into the loan charge, published in December 2019, and which prompted the launch of the subsequent tax advice consultation. The loan charge review noted that “many of the taxpayers involved claimed that they had acted on advice from their tax agents, and now find themselves with no effective remedy against that bad advice.” It is hoped that the outcome of the new consultation will raise standards and protect businesses and individuals, while paving the way for tax advisers and accountants who already act professionally. Advisers will have no alternative but to belong to a recognised professional accountancy body that has regulatory and supervisory responsibilities to ensure quality standards are maintained. 

For years, professional accountancy bodies have lobbied the government to try to get the term ‘accountant’ secured as a protected term. In doing so they believe that standards would rise across the sector by making membership of a professional body mandatory for those who provide accountancy and tax advice, and thereby creating accountability around standards, qualifications and ongoing professional development. Regulatory oversight will also present businesses and individuals with an additional path of recourse should they feel that they have been given incorrect advice. As it stands, the sector has ‘partial regulation’ in that while it is recommended that those providing tax advice belong to a professional body and adhere to its byelaws, regulations, standards and guidance, membership is not mandatory. Despite strong support, the government has always resisted mandatory regulation for two reasons:

  1. Ideologically, the government believes that regulation is inherently anti-competitive and that the agenda is to gain a commercial advantage.
  2. Technically, it is HMRC’s role to police standards of those who are not qualified or do not belong to a recognised professional supervisory body.

The problem is that while a large proportion of the sector is already regulated and being held to account, unscrupulous and incompetent individuals can easily avoid professional body oversight. What’s more, as the outcome of the loan charge review shows, the current system of accountability by HMRC is not as effective as it should be. What this consultation represents for anyone who provides tax advice is the first major opportunity to create mandatory registration or regulation in the sector, holding all accountants to the same standards, and protecting businesses and individuals from rogue or incompetent traders.  

Never before has the need for this consultation been more aptly demonstrated than during the Covid-19 pandemic. The first prosecutorial cases are already emerging as a result of abuse of government support schemes. Some wrong doers are citing misinformation from their accountants, while others have actively committed fraud which their accountant did not report. What the pandemic has done is highlight that the opportunity for exploitation exists through incompetence or corruption, and that a more active, defined system of controls can only help to support the transparency and performance of the marketplace. 

John Edwards, CEO, The Institute of Financial Accountants comments “Here at the IFA, we genuinely believe that this is a unique opportunity for the sector and that we have the collective ability to affect positive change for accountants. It is our desire that at the end of this consultation, we will have taken the first step on the path to protect the term ‘accountant’ in law and in doing so level the playing field between those who do take their responsibilities and qualifications seriously, and those who don’t, ensuring all tax advisers are members of, and regulated by, one of  the recognised professional accountancy bodies. While we have provided response details for those who wish to respond to the call for evidence directly, there is a significant investment of time required to do so, and therefore we are encouraging accountants to send their views and opinions to us for inclusion in our official response. The consultation formerly closes on 28 August 2020, but we would appreciate any responses to be sent to us as soon as possible before close of business on the 7 August 2020, to allow us sufficient time to collate.”

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