Corporate report

Raising standards in the tax advice market - HMRC’s review of powers to uphold its Standard for Agents

Published 10 March 2022

Executive summary

As part of the outcomes of its 2020 call for evidence into raising standards in the tax advice market, HMRC committed to publishing the outcomes of an internal review of its powers to tackle poor agent behaviour and help to uphold its standard for agents (referred to throughout as the agent standard).

This report delivers that commitment, forming part of HMRC’s ongoing work around raising tax advice standards, and will be followed later in 2022 by consultations on tackling the high cost of claiming tax refunds, and options for improving the regulatory framework in the tax advice market.

HMRC is committed to tackling poor tax agent behaviour. This document summarises the powers and approaches HMRC uses to deal with poor tax agent behaviour. It considers examples of HMRC’s engagement activity intended to constructively influence positive outcomes and summarises the more formal options HMRC can call upon if engagement does not work, or if the behaviours seen are more serious.

The review concludes that HMRC is using all options to secure positive outcomes where poor tax agent behaviours are found, but that more can be done to bring clarity and consistency to HMRC’s relationship with tax agents; and that by improving analysis of patterns of behaviour, resource can be better targeted at the worst behaviours and make more use of existing powers.

Further measurement of the effectiveness and impact of HMRC’s approaches will be undertaken to gain deeper insight and inform future development of HMRC’s approach to maintaining agent standards.

HMRC will:

• publish its approach to tax agents in a single policy statement, including how to report breaches of the agent standard
• update and publicise the agent standard
• continue to ensure consistency across HMRC in its overall approach to agents
• focus HMRC’s efforts to uphold its agent standard on the worst agent behaviours

1. Introduction

Background

In March 2020, the government issued a call for evidence into raising standards in the tax advice market following a recommendation in the independent Loan Charge Review that the government ‘must improve the market for tax advice’ and ‘establish a more effective system of oversight, which may include formal regulation, for tax advisers’.

Following this, in November 2020 the government published the summary of responses and next steps to that call for evidence. The government committed to:

• raise awareness of the HMRC agent standard and review HMRC powers to enforce it
• consult on whether to introduce a requirement for mandatory professional indemnity insurance for tax advisers and the definition of tax advice
• work collaboratively with professional bodies to understand the role they play in supervising and supporting their members and raising standards in the profession
• tackle the high cost to consumers of claiming tax refunds

The summary of responses included feedback from respondents that HMRC could make better use of its existing powers to uphold agent standards and tackle poor agent behaviour. Specific quotes from professional body respondents to the call for evidence included:

• ‘HMRC should be willing to discuss openly their concerns with agents’
• ‘HMRC have a wide-ranging set of powers that are more than capable of dealing with any given scenario. The problem seems that action becomes a too late reaction or stronger actions are not taken’
• ‘HMRC has all the powers that they need, but they don’t use them’
• ‘We consider it crucial that existing powers are used and that it is made clear that HMRC will take action where appropriate’
• ‘The pace at which (HMRC’s agent powers) have grown has left little opportunity for proper evaluation’

This document summarises the conclusions of the review of HMRC’s powers to uphold its agent standard. It is a stock-take of HMRC’s existing powers to tackle poor agent behaviours and covers the initiatives, policies and powers that HMRC uses and what HMRC will do next to develop its approach. In considering these onward steps, HMRC has taken into account the principles set out in its Powers and Safeguards Review, which was published in February 2021.

HMRC’s relationship with tax agents

The term ‘tax agent’ refers to all individuals and businesses involved in professionally representing or advising taxpayers. This includes anyone who provides tax advice or offers services to third parties to assist compliance. It potentially includes a wider range of professions, from accountants and tax advisers to financial advisers, payroll professionals and legal professionals.

HMRC recognises the importance of good and responsible tax agents in a fair and healthy tax system, although there is no statutory requirement for HMRC to work with a specific tax agent, even where a client authorises one.

The role of a designated agent is recognised in HMRC’s Charter:

We’ll respect your wish to have someone else deal with us on your behalf, such as an accountant, friend or a relative. We’ll only deal with them if you have authorised them to represent you.

The Charter goes on to make clear that:

To protect you, HMRC works with professional bodies to set the standard expected of professional agents who support you to meet your tax obligations. We can refuse to work with professional agents who fail to adhere to this standard.

Professional standards for tax agents

The majority of tax agents are competent, with high standards. They help customers access reliable tax advice and ensure that they pay the right amount of tax at the right time. By providing good advice and high-quality work for their clients, agents help to build trust and add value to personal and business tax dealings. Many have the technical expertise required and not only carry out tax services such as filing returns but also provide high quality advice to their clients, helping them navigate the tax system by (for example) promoting take-up of the reliefs that government wants customers to use.

There are some tax agents, however, who do not provide a good quality service to their clients. This may be because they lack competency, have not kept up with technical changes, or do not have relevant specialist expertise. A small number are extreme boundary pushers, dishonest or fraudulent. The behaviour of this minority of tax agents causes difficulties for their clients and HMRC that are time-consuming and expensive to resolve, both for taxpayers and the Exchequer.

A single tax agent can represent hundreds, sometimes thousands, of clients. Poor behaviour by just one tax agent has a disproportionate impact on the taxpayers they represent, HMRC staff and resources, and tax revenues. Consequently, high tax agent standards have a key role in the efficiency of and trust in the tax system and are not just about minimising tax error.

‘Professional Conduct in Relation to Taxation’ (PCRT) is a detailed non-statutory code of conduct that several professional bodies expect their members to follow. Other professional bodies subscribe to PCRT, and may also have their own specific codes of conduct. PCRT is jointly produced by:

• The Association of Accounting Technicians (AAT)
• The Association of Chartered Certified Accountants (ACCA)
• The Association of Taxation Technicians (ATT)
• The Chartered Institute of Taxation (CIOT)
• The Institute of Chartered Accountants in England and Wales (ICAEW)
• The Institute of Chartered Accountants of Scotland (ICAS)
• The Society of Trust and Estate Practitioners (STEP)

To set expectations of professional conduct for tax agents who are not professional body members, HMRC published its own agent standard in 2016, which applies to all paid tax agents that interact with HMRC. Like PCRT the agent standard is not a statutory code, but it mirrors most of PCRT’s key principles.

HMRC’s approach to upholding agent standards

HMRC seeks to work with tax agents to maintain high standards by helping them get things right from the start. HMRC provides dedicated agent services, information and support in a number of different ways, such as emails, blogs, webinars and a dedicated helpline.

Where support and information have not helped to deliver expected behaviours, HMRC upholds its agent standard using engagement initiatives and a number of existing formal powers that align with that aim.

In most of these cases engagement comes first, and Chapter 2 sets out examples of these approaches. Where behaviours fall far below the standard of what is expected, HMRC can use formal powers as a first recourse or may be able to refuse to deal with a tax agent altogether. Chapter 3 sets out the policies HMRC works to within the framework created by the Commissioners of Revenue and Customs Act 2005 (CRCA 2005), and Chapter 4 sets out the formal powers specifically designed to tackle various poor agent behaviours.

2. HMRC’s engagement activity relating to tax agents

HMRC uses a variety of approaches to support agents, build trust, encourage co-operation, set expectations and reduce non-compliance without recourse to formal alternatives. In this context, the term ‘engagement activity’ refers to work that is not underpinned by a specific statutory power.

An important aspect of this engagement activity is the support and information HMRC regularly and proactively provides. This includes:

• introductory emails for tax agents who register with HMRC, which provide information on products designed to help and support agents, and signpost to news, information and updates in legislation
• monthly Agent Update publications
• blog posts
• tax agent talking points
• webinars
• a dedicated online Agent Forum
• dedicated helplines and contacts for tax agents
• a range of self-serve Agent Toolkits that help agents ensure their clients get their tax returns right, as well as online guidance and manuals available for the public to consult
• separate email updates on specific topics (recent examples include EU transition and COVID-19 support schemes)

HMRC’s support is flexible. In response to rapid post-pandemic change, for example, HMRC increased the frequency of the regular Agent Update on GOV.UK from bi-monthly to monthly. The range and frequency of HMRC forums and engagement with professional bodies also increased.

On an ongoing basis HMRC engages with tax agents where concerns about tax agent standards are identified, with measurable success. Recent initiatives HMRC has undertaken include the following examples.

Counter avoidance ‘Standard for agents’ project

With reference to the agent standard, HMRC challenges the actions of tax agents who submit returns for clients in tax avoidance arrangements.

Between April 2019 and December 2021 HMRC held meetings with 11 tax agents, representing 373 clients in tax avoidance arrangements. The tax at risk was in excess of £200 million. The tax agents agreed to either stop acting for such clients or encourage clients under enquiry to settle with HMRC. HMRC has supported tax agents in this by providing statements or wording for them to use in discussions with their clients, and by providing HMRC settlement contacts.

Large business tax agent thematic reviews

For many years HMRC has monitored the tax affairs of the largest businesses operating in the UK through a Customer Compliance Manager (CCM) relationship.

The CCM relationship provides an opportunity for HMRC to engage with large tax agent businesses about their activities, undertake thematic compliance reviews and discuss any emerging concerns with senior leaders in the business. This provides HMRC a regular opportunity to influence changes of behaviour and improve standards within large tax agent businesses.

There have been 3 large tax agent thematic reviews completed since 2019 which have secured additional tax receipts of £30.2 million, with a further £35 million estimated to be in the pipeline.

Tackling ineligible repayment claims by agents

In May 2019, HMRC addressed a 110% increase in demand for Income Tax relief claims for employment expenses by taking action to reduce unacceptably high amounts of ineligible claims. These claims were being submitted by tax agents on behalf of their clients but were ineligible because tax agents had not taken care to check they were valid.

HMRC introduced a process to suspend working all claims submitted by agents where the level of ineligibility was high. These suspensions were only lifted after in-depth testing of new claims showed improvements had been made to the agent’s application process and website information.

HMRC has issued written warnings to 52 agents about ineligible claim levels. The suspension process has been used on 9 occasions, and in 2 cases it was applied twice to the same agent. As part of the process, HMRC considers whether a referral for consideration of a public interest disclosure to a professional body is relevant.

HMRC now has calls with new tax agents setting up in this line of business to explain the position on ineligible claims. In some cases, they are asked to voluntarily stop submitting claims until the ineligibility rate has reduced. This has proved successful in reducing ineligible claims without needing to use the suspension process: 7 tax agents agreed not to submit new claims until they had improved their processes of due care.

A further 4 tax agents ceased trading in the expense claims market as a result of HMRC’s intervention, because those tax agents were unable to implement due care processes.

The ‘agent’s own tax affairs’ project

This project began in 2021 and is continuing in 2022. Tax agents with outstanding tax debts in relation to their own affairs, and who were therefore breaching the agent standard, were contacted by HMRC with the aim of securing settlement of the debt or formal Time to Pay (TTP) arrangements.

HMRC telephoned 281 tax agents with outstanding debts and secured £2.37 million of revenue in arrears from 215 of those agents, from a total arrears of £3.37 million. The remaining tax agents (with combined total arrears of £1.0 million) are either subject to continuing intervention and face formal action or have had their access to HMRC’s online tax agent services suspended. This suspension limits their ability to act for their clients through HMRC’s digital services (see Chapter 3 for more details).

3. HMRC policies that address poor tax agent behaviour

HMRC has a number of policy approaches to address poor tax agent behaviours which are supported by the framework provided by CRCA 2005. While they help to uphold the agent standard, all were introduced before the agent standard was first published.

Suspending agent codes to limit agent access to Self-Assessment (SA) and Corporation Tax (COTAX) functions

Tax agents require access codes to be able to use HMRC’s digital SA and COTAX online services for tax agents. Use of these online services is governed by HMRC’s Online Services terms and conditions. HMRC can suspend these codes and block access to these services in certain circumstances. Suspensions are usually brief but can be indefinite if circumstances are severe enough to warrant that.

Suspension of codes is a swift solution that safeguards taxpayer data if any potential security concerns are identified, including whether the tax agent is continuing to trade lawfully under anti-money laundering legislation. This helps strengthen confidence and trust in the administration of the tax system and HMRC’s role as a controller of personal data.

Suspension of codes is also an option for upholding the agent standard where tax agent behaviours are unacceptable. In most cases access is restored if the tax agent responds constructively to HMRC’s concerns and addresses their poor behaviours or non-compliance.

Key strengths of tax agent code suspension are that it is quick to implement and that it applies to all tax agents using those online services. However, it does not affect the small numbers of tax agents that do not interact digitally with HMRC. There can also be consequences for an agent’s clients, as suspension prevents an agent from submitting client returns and may lead to client penalties for late returns. Although suspensions are not subject to appeal, they can be easily reversed if HMRC and the agent resolve the underlying differences or misunderstandings, ensuring that the impact of accidental suspension is limited.

HMRC’s Refusal to Deal With (RTDW) approach to agents

HMRC can refuse to deal with tax agents in certain circumstances, even if a specific authorisation for that agent by their client is held by HMRC.

RTDW is reserved for extreme and exceptional circumstances of poor agent behaviour, such as threatening, abusive and rude behaviour towards HMRC staff, and serious abuse of the tax system. Submissions are made by HMRC to its Commissioners for a decision. HMRC also considers whether it is appropriate to make a Public Interest Disclosure to the relevant professional body.

The RTDW process is not a statutory power and there is no right of appeal, but a 2011 Judicial Review confirmed HMRC’s right to make RTDW decisions. As RTDW curtails the ability for sole proprietor tax agents to trade freely, HMRC has robust governance arrangements in place to deliver proper scrutiny and ensure it is a proportionate response. Submissions are made by the relevant HMRC official to the HMRC Commissioners for a decision on whether to invoke RTDW. To date, RTDW decisions have only been applied to individuals, and not to whole firms.

RTDW has the potential to positively change the behaviour of the agent, but ultimately protects HMRC staff and public revenues from abuse by the worst tax agents. RTDW has a key place in a framework of options for upholding tax agent standards as an option of last resort.

Publishing Details of Deliberate Defaulters (PDDD)

Since February 2013, HMRC has published the names of taxpayers penalised under civil procedures for deliberately defaulting on certain tax obligations. The last publication of Details of deliberate tax defaulters was November 2021.

PDDD draws attention to tax agents who are not compliant with their own tax affairs – the negative publicity and reputational impact that publication attracts are intended to have a deterrent effect. Six agents were named in the 4 lists published in 2021.

HMRC also considers making a Public Interest Disclosure to the relevant professional body where a tax agent named in a PDDD document is a professional body member.

4. HMRC’s statutory powers that address poor tax agent behaviour

Where a tax agent has breached the agent standard and HMRC engagement does not achieve voluntary behaviour change, or where the poor behaviour of a tax agent is so serious that swift and firm action is required, there are several formal powers HMRC can utilise.

Each power is briefly described below. Although compliance in their own tax affairs is expected of agents, enforcement of this is covered by powers such as those in the Taxes Management Act 1970. These powers are not therefore covered here. The powers listed below are limited to those that help to address poor professional behaviours of tax agents by limiting what they can do or taking more direct action against them.

Tax agents: Dishonest Conduct (Schedule 38 Finance Act 2012)

Schedule 38 gives HMRC the power to issue conduct notices and financial penalties up to £50,000 to tax agents who have acted dishonestly in their dealings with HMRC. It has the strength of applying to all tax agents that fall within its definition and who HMRC can show are acting dishonestly. This is a high evidential threshold to meet. The scope of Schedule 38 does not apply to poor behaviours that are not dishonest.

Public Interest Disclosures (Schedule 20(3) Commissioners for Revenue & Customs Act 2005)

S.20(3) has the potential to leverage improvement in tax agent behaviour via their professional body by making a disclosure of misconduct to that body. Professional accreditation is a valuable asset to tax agents, and the possibility of tarnish or loss to that status carries weight.

S.20(3) applies only to tax agents who are members of professional bodies with responsibility for regulation of their members. Unaffiliated tax agents, by definition, have no professional body to whom a disclosure can be made.

Penalties for errors: error in taxpayer’s document attributable to another person (Schedule 24 (1A) Finance Act 2007)

Schedule 24 (1A) provides for a penalty to be applied to a third party where a taxpayer has given HMRC a document which contains an error, and the error was attributable to the third party deliberately supplying false information to the taxpayer (whether directly or indirectly); or the third party deliberately withholding information from the taxpayer with the intention of the document containing the error. Depending on the specific circumstances of each case, penalties can range between 30% to 200% of potential lost revenue.

Tax advisers generally receive information from their client and then give advice based on that information. It is possible, though not common, for a tax agent to meet the criteria where they deliberately give a taxpayer false information with the intention of the taxpayer then giving HMRC a document containing an error.

Promoters of Tax Avoidance Schemes (POTAS) (Finance Act 2014)

POTAS aims to deter the development and use of avoidance schemes by influencing the behaviour of promoters, their intermediaries and clients. POTAS allows for the issue of formal notices, such as Conduct Notices and Defeat Notices, upon tax agents who promote avoidance schemes. The regime was strengthened in Finance Act 2021, introducing a new stop notice and powers to tackle supply chains.

Disclosure of Tax Avoidance Schemes (DOTAS) (Part 7 Finance Act 2004) and Disclosure of Avoidance Schemes, VAT and Other Indirect Taxes (DASVOIT) (Schedule 17 Finance (No.2) Act 2017)

Under DOTAS and DASVOIT, promoters of tax avoidance schemes must disclose to HMRC details of the schemes they are promoting, how they work and who their clients are. The regime was strengthened in Finance Act 2021, so that HMRC can issue an initial notice to a wide range of promoters, including tax agents and intermediaries in the avoidance supply chain. This notice requires them to supply HMRC with the information it needs. If the information is not provided, or is insufficient, HMRC will issue a DOTAS Scheme Reference Number (SRN) and publish information to make sure taxpayers are sufficiently informed of HMRC’s interest in the scheme.

Enablers Legislation (Schedule 16 Finance (No. 2) Act 2017)

Schedule 16 allows financial penalties to be imposed on each person who enabled tax avoidance, provided that the abusive tax arrangements in question were defeated. ‘Abusive’, ’tax arrangement’ and ‘defeat’ are each defined in Schedule 16. Financial penalties apply to arrangements that were enabled, entered into, and defeated, after 17 November 2017. Penalty calculations are based on the total amount or value of all the relevant consideration received or receivable by the person in question. The enablers of avoidance regime was strengthened in Finance Act 2021, enabling HMRC to issue penalties sooner for certain schemes.

As part of its strategy to challenge and deal with promoters of tax avoidance schemes, the government confirmed at Autumn Budget 2021 that it would introduce a further package of measures to build on changes to existing avoidance regimes and ensure promoters face stronger sanctions more quickly. The measures, contained in sections 85 to 91 Finance Act 2022, include:

• an asset freezing order that will prevent promoters from dissipating or hiding their assets before paying the penalties that are charged as a result of them breaching their obligations under the anti-avoidance regimes

• new rules that enable HMRC to make a UK entity, which facilitates the promotion of tax avoidance by offshore promoters, subject to a significant additional penalty

• a new power that enables HMRC to present winding-up petitions to court for companies and partnerships operating against the public interest

• new legislation that enables HMRC to name promoters, the websites they use and the schemes they promote, at the earliest possible stage, to warn taxpayers of the risks of entering into avoidance arrangements and help those already involved to exit avoidance

Money Laundering, Terrorist Finance and Transfer of Funds (Information on the Payer) Regulations 2017, as applied to external accountants and tax advisers (‘accountancy service providers’)

The Money Laundering Regulations (MLRs) require all external accountants and tax advisers to be supervised for anti-money laundering purposes. The MLRs make it an offence not to comply with this obligation.

The MLRs require businesses undertaking supervised activity to comply with their obligations as set out in the regulations, including checks on the identity of their clients and monitoring of their ongoing business relationship. Any suspicious activity must be reported to the National Crime Agency.

HMRC supervises approximately one-third of UK tax agents, and these are generally agents who do not hold professional body membership. The remaining two-thirds are supervised by professional bodies. The MLRs provide HMRC with a range of powers for enforcing compliance with the requirements of that legislation, such as fines, suspension or cancellation of registration, and criminal prosecution. HMRC publishes an annual assessment about the use of its MLR powers.

Corporate Criminal Offences (Part 3 Criminal Finances Act 2017)

The Corporate Criminal Offences (CCO) powers, which took effect on 30 September 2017, are intended to overcome the challenges of attributing criminal liability to corporate entities where their representatives have criminally facilitated tax evasion, either in the UK or overseas. The CCO only apply to those tax agents that are incorporated businesses.

The CCO powers create 2 criminal offences: one relating to the evasion of UK tax and the other relating to the evasion of foreign tax.

There are 3 characteristics that apply to both the domestic and foreign tax evasion facilitation offences (with additional requirements for the foreign offence):

1. that there is criminal tax evasion by a taxpayer under existing law

2. that there is criminal facilitation of that tax evasion by an associated person of the relevant body acting in that capacity (ie tax adviser in a firm)

3. that the relevant body failed to prevent its representative from committing the criminal facilitation act

The CCO are strict liability offences and a successful prosecution could lead to an unlimited fine, ancillary orders (such as confiscation orders or serious crime prevention orders) as well as a public record of conviction which could cause significant reputational damage.

Criminal prosecution of tax agents

HMRC carries out criminal investigations in line with its published criminal investigation policy. This includes investigations into tax agents that have potentially committed offences such as tax fraud, whether for issues with their own tax affairs or where they have helped others to commit the fraud. Criminal tax agents are a minority of the overall agent population, but an ongoing problem to which HMRC continues to invest resource to hold them to account.

5. Conclusions

HMRC undertakes a wide range of activity to tackle poor agent behaviours. These activities fall under the 3 broad categories of (a) engagement initiatives, (b) policy approaches within the framework of CRCA 2005 and (c) specific statutory powers designed to address particular challenges and situations. The powers HMRC relies on to uphold the agent standard pre-date the publication of the standard itself.

In this review HMRC has considered:

• the scope of its powers and whether they cover all elements of the agent standard
• its overall approach to using these powers to tackle poor agent behaviours
• any differences in approach in relation to those agents who are professional body members compared to those who are not

HMRC has taken into account the principles set out in its Powers and Safeguards Review, published in February 2021, to ensure that HMRC’s powers are proportionate and are used fairly, carefully and consistently.

The following tables show which elements of the HMRC agent standard are addressed by the powers and policies covered in chapters 2, 3 and 4. Three key observations are:

• HMRC has some strong options, specific to certain situations, which can be brought to bear against non-compliance with most of the standards in the right circumstances

• existing formal powers have been designed to address specific situations and therefore lack general application to uphold every aspect of the standard. There is no universal option for tackling any breach of the agent standard

• intermediate responses, for tackling behaviours that do not trigger the high thresholds for using (for example) S.20(3) CRCA 2005 or Schedule 38 FA 2012, are limited in number and in scope

Principle: Integrity

Standard	Engagement response(s)	Formal response (if thresholds are met)
We expect agents to be straightforward and honest with HMRC	Engagement and constructive dialogue	Section 20(3) CRCA 2005, Schedule 38 FA 2012, Fraud referrals

Principle: Professional competence and due care

Standard	Engagement response(s)	Formal response (if thresholds are met)
Maintain correct and up-to-date knowledge of the areas of tax that they deal with	Engagement and constructive dialogue
Work to prevent errors in their clients’ tax calculations or claims, taking particular care not to include figures in returns or claims which are not sustainable	Engagement and constructive dialogue	Section 20(3) CRCA 2005, Schedule 38 FA 2012, Fraud referrals, CCOs
Advise their clients to take steps to set matters right where they find errors in their tax affairs	Engagement and constructive dialogue	Schedule 38 FA 2012, Public Interest Disclosures
Comply fully with data protection law and regulations, including keeping online access credentials safe from unauthorised use at all times	Engagement and constructive dialogue, Suspension of agent online services access	Refusal to Deal With, Public Interest Disclosures
Maintain the security of their systems and their HMRC account credentials against current threats	Engagement and constructive dialogue, Suspension of agent online services access	Refusal to Deal With

Principle: Professional behaviour

Standard	Engagement response(s)	Formal response (if thresholds are met)
Comply fully with tax law and regulations relating to their professional activity, including the MLRs	Engagement and constructive dialogue, Suspension of agent online services access	Section 20(3) CRCA 2005 MLR enforcement, where relevant
Ensure that their own tax affairs are correct and up to date	Engagement and constructive dialogue, Suspension of agent online services access, Publishing Details of Deliberate Defaulters	Tax compliance powers (not reviewed in this paper), Public Interest Disclosures
Deal courteously and professionally with HMRC staff	Engagement and constructive dialogue	Refusal to Deal With, Public Interest Disclosures
Have clear terms of engagement with their clients	Engagement and constructive dialogue

Principle: Lawful

Standard	Engagement response(s)	Formal response (if thresholds are met)
Agents must act lawfully and with integrity at all times, and expect the same from their clients	Engagement and constructive dialogue, Suspension of agent online services access	Refusal to Deal with, Schedule 38 FA 2012, Fraud referrals, Public Interest Disclosures
Tax planning should be based on a realistic assessment of the facts and a credible view of the law	Engagement and constructive dialogue	Responses in accordance with Promoters Strategy e.g. DOTAS, POTAS, Enablers legislation, Schedule 38 FA 2012, Public Interest Disclosures
Agents should advise their clients where there is a material uncertainty in the law. The risk and costs of challenge by HMRC, and any resultant court case, should be made clear to clients	Engagement and constructive dialogue	Responses in accordance with Promoters Strategy e.g. DOTAS, POTAS, Enablers legislation, Schedule 38 FA 2012, Public Interest Disclosures

Principle: Disclosure and Transparency

Standard	Engagement response(s)	Formal response (if thresholds are met)
HMRC expects any disclosure by agents to represent all relevant facts fairly.	Engagement and constructive dialogue	Schedule 38 FA 2012, Public Interest Disclosures

Principle: Advising on tax planning arrangements

Standard	Engagement response(s)	Formal response (if thresholds are met)
Agents must not create, encourage or promote tax planning arrangements or structures that set out to achieve results that are contrary to the clear intention of Parliament in enacting relevant legislation	Engagement and constructive dialogue	Responses in accordance with Promoters Strategy e.g. DOTAS, POTAS, Enablers legislation, Section 20(3) CRCA 2005
Agents must not create, encourage or promote tax planning arrangements or structures that are highly artificial or highly contrived and seek to exploit shortcomings in the relevant legislation	Engagement and constructive dialogue	Responses in accordance with Promoters Strategy e.g. DOTAS, POTAS, Enablers legislation, Section 20(3) CRCA 2005

Principle: Professional judgment and appropriate documentation

Standard	Engagement response(s)	Formal response (if thresholds are met)
HMRC expects agents to exercise professional judgement in applying these standards to particular client advisory situations	Engagement and constructive dialogue	Schedule 38 FA 2012, Public Interest Disclosures
Agents should keep timely notes of the rationale for judgements exercised in seeking to keep to these requirements	Engagement and constructive dialogue

This review has allowed a number of general conclusions to be made about HMRC’s overall approach to tackling poor agent behaviours:

1. HMRC’s overall approach for tackling poor agent behaviours is still evolving

HMRC seeks to strengthen trust in the tax system and create a level playing field by addressing poor agent behaviours as quickly and efficiently as possible. The engagement initiatives showcased in Chapter 2 demonstrate how effective these approaches can be, and in the minority of cases where engagement is not successful there are stronger policies and powers that HMRC can draw upon.

HMRC continually explores new solutions in response to shifting trends in poor tax agent behaviour and is developing and refreshing strategies and policies to evolve its overall response as part of its fundamental responsibilities and obligations.

2. The impact of HMRC’s activity to tackle poor tax agent behaviour will be strengthened by greater co-ordination and integration of best practice

The way in which HMRC tackles poor tax agent behaviours and upholds agent standards was not designed as a single framework but has developed over time in response to specific problems.

Because different approaches have been taken in different HMRC business areas, HMRC is rich in experience and insight about the effectiveness that such approaches can have but there is not always consistency in approach across all areas when poor agent behaviour is encountered. By using existing governance arrangements and working groups to ensure this insight is shared and embedded across HMRC, the impact of the resource HMRC has available to tackle poor agent behaviours in line with its risk-based approach can be optimised, and areas for further exploration or development identified.

3. Public information about HMRC’s policies and processes relating to tax agents and how poor tax agent behaviours are tackled is spread across many different locations and is not as joined up as it could be

There is a significant amount of information, published both internally and externally, about how HMRC deals with poor agent behaviours. Work is under way to refresh and align this information, and explore how to bring greater publicity to HMRC’s work on agent standards.

There are several strategies that are related to tax agents, such as the HMRC promoters strategy and HMRC digital strategy, but there is no one-stop hub that brings a comprehensive overview of the different elements into one place, to make the whole picture in relation to agents clear.

In addition, this review has demonstrated the differences in responses available when tackling the actions of tax agents who are not a member of a professional body compared to those who are professional body members.

Breaches of the agent standard can only be reported by non-HMRC sources if the person making the report knows what the standards are, who they apply to and how to report them. The poor behaviour of affiliated agents can be reported by the client directly to the relevant professional body to be investigated. However, HMRC does not have a clear way for poor tax agent standards and behaviours to be reported, meaning that unaffiliated tax agents may not be held to the same level of scrutiny as those affiliated to professional bodies.

When a tax agent is not a member of a professional body the option of making a Public Interest Disclosure is not available. This has the effect of making the standards of unaffiliated agents subject to less scrutiny than affiliated agents. Taken together with HMRC’s enforcement coverage in Table 1, this means the bar for upholding professional standards through effective enforcement is lower for unaffiliated agents than it is for those affiliated to professional bodies – the playing field is therefore not as level as it should be.

Furthermore, recent research published in Understanding the characteristics of unaffiliated tax agents revealed that awareness of HMRC’s agent standard is low among tax agents not affiliated to a professional body. Only 18% of respondents referred to the agent standard by name, with a further 11% referencing HMRC guidance without mentioning standards. 21% of respondents said that they do not follow any professional standard, with a further 7% uncertain.

What will HMRC focus on next in relation to tax agent standards?

In November 2021, HMRC published its:

• summary of responses to its March 2021 call for evidence into the tax administration framework, which closed in July 2021. One of the themes of the responses was that ‘agents have a key role to play in the tax system and their role should be supported’. A proposed key objective for the tax administration framework was therefore to: ‘help build trust in a tax system that is recognised as fair and even-handed’. Respondents said that this should include making sure that: ‘HMRC’s powers are proportionate and will be used fairly, carefully and consistently’.

• summary of responses to its July 2021 consultation on the definition of tax advice and whether to introduce mandatory professional indemnity insurance for tax advisers. HMRC announced there would be a further consultation exploring options for improving the regulatory framework in the tax advice market, and a definition of tax advice, in 2022, as well as a consultation on tackling the high cost of claiming tax refunds.

Mindful of the findings of the tax administration framework consultation, and notwithstanding the outcome of the tax advice market regulatory framework consultation, HMRC will take steps to further strengthen its approach to upholding agent standards. This work will move forward in 2022. These steps are:

1. Publish HMRC’s approach to tax agents in a single policy statement, including how to report breaches of the HMRC agent standard

This will:

• bring information about HMRC’s agent policies together in one place for the first time
• make HMRC’s response to tax agents clearer and easier to understand for tax agents, their clients and HMRC officers
• support procedural fairness and transparency and level the playing field between affiliated and unaffiliated agents, strengthening trust in the tax system

2. Update and promote the agent standard

This will include:

• clarity about who the Standard applies to, in line with the outcomes of the consultation on the proposed definition of tax advice in 2022
• specific amendments to address problematic issues and trends that HMRC sees, such as transparency around contingent fees and inappropriate use of HMRC’s online services
• exploring whether the Standard needs to be given stronger status
• relaunching the Standard, making sure that the principles and changes are communicated efficiently and effectively, and reaching as many tax agents as possible.

3. Continue to ensure consistency across HMRC in its overall approach to agents

This will be done by:

• using existing internal governance groups to share best practice and assure agent compliance across HMRC
• completing work that began in 2021 to update staff guidance and training so that good tax agents are supported but poor agent behaviours that fall short of the Standard are addressed effectively
• continuing to maximise the potential of data and information as HMRC becomes increasingly digital, reinforcing the risk assessments and analysis that inform HMRC’s approaches to tackling poor agent behaviours

4. Focus HMRC’s efforts to uphold its agent standard on the worst agent behaviours

To achieve this, HMRC will:

• build and evaluate its knowledge and evidence base to understand the impact of poor agent behaviours, identifying where the worst problem areas are

• measure the impact of HMRC’s interaction with tax agents, to demonstrate the effectiveness of our approaches to raising agent standards

• use this analysis in reviews of existing powers or processes to help identify changes that allow swift, effective and timely action to be taken where necessary, with appropriate safeguards - this approach will support the role of good agents within HMRC’s Tax Administration Framework and compliment the objectives of the Tax Administration Strategy

• inform future assessments about whether change is necessary – for example, whether any new powers may be needed to ensure all requirements of the agent standard can be upheld

• support the outcomes of the consultation into options for regulation and oversight of tax agents

• target activity to the worst areas to make greater use of existing powers to tackle poor agent behaviour