Stronger HMRC ‘Standard’ is a further step into regulating tax agents

The Chartered Institute of Taxation (CIOT) has welcomed the announcement that HM Revenue and Customs (HMRC) is to strengthen its ‘Standard for Agents’ but says that there are question marks over how it will be enforced, and notes that members of professional bodies will still be subject to stronger consumer protection requirements.

The ‘Standard for Agents’ sets out what HMRC expect from tax agents who transact with them. The Standard is being updated following a consultation on improving standards in the repayment agent sector, though the changes will apply to all tax agents. Specifically HMRC say the updated Standard will include:

a requirement for greater evidence of customer consent, to ensure taxpayers better understand the agreement they are entering into;
stricter transparency rules, including introducing a 14-day ‘cooling off’ period for customers after entering into an arrangement with an agent, and an obligation on agents to ensure all communications and advertising material are fair, clear, accurate and do not mislead or conceal material facts.

John Cullinane, Director of Public Policy for the Chartered Institute of Taxation (CIOT), commented:

“This looks a significant, and broadly positive, step into the area of regulating tax agents from HMRC.

“These changes are unlikely to impact much on tax agents who are members of professional bodies such as CIOT, as they are already subject to Professional Conduct in Relation to Taxation (PCRT), a stronger set of professional and ethical standards. However they are a step forward in raising standards among those outside the PCRT bodies.

“The Standard for Agents already broadly reflects PCRT as regards revenue protection – now HMRC intend to introduce some consumer protection elements as well. But the Standard still won’t go as far as PCRT on areas such as avoiding conflicts of interest and continuous professional development.

“One key question is around enforcement: what happens if an agent doesn’t live up to the Standard? It’s not clear that HMRC can ‘derecognise’ agents other than in a tiny handful of cases, nor is there any range of intermediate measures corresponding to what professional bodies do to help members comply with professional rules and begin to sanction them if they don’t.

“HMRC have a big job to do in collecting revenue so it’s not clear they are right to be a regulator as well. They would face a conflict of interest, and that is already present in the consumer protection issues that have arisen with high volume repayment agents.

“The consumer protection regulatory gap is best met by trying to strengthen and support what the professional bodies do: we should aim for a situation where all advisers are members of professional bodies and where those who behave unacceptably cannot practice if they are expelled from a professional body. We recognise this may require additional scrutiny of professional bodies themselves, though this should be through by a body established to have a consumer protection objective, and independent of the state’s need for revenue.”