The Chartered Institute of Taxation (CIOT) is calling on the government to include non-compliant umbrella companies and providers of tax software in their plan to give people a “greater chance of redress” from the impact of “poor tax advice”.
The CIOT said it was responding to an HMRC consultation on “raising standards in the tax advice market” that came following a recommendation by Sir Amyas Morse as part of his “review of the loan charge”.
According to the group, HMRC proposes to introduce a compulsory requirement for tax advisers to hold professional indemnity insurance (PII).
CIOT also said that HMRC is looking for “feedback “on agreeing a definition of tax advice to make it clear who will require PII and who will not.
There is currently no single definition of ‘tax advice’ or ‘tax adviser’ in legislation.
John Cullinane, director of public policy for CIOT, said: “A wide definition of tax advice is vital to help HMRC use compulsory PII to raise standards across the tax advice market, improve the public’s trust in tax advice and enable taxpayers to have redress when things go wrong.
“A widely drawn and principles-based definition of tax advice is essential if compulsory PII is to achieve its purpose.”
He added: “If a provider of advice can be sued for the losses that their mistakes cause clients, then it is wrong if the client cannot be compensated because they do not have the funds to pay out. That is why they should be insured.”