The Government’s consultation exploring options to improve the regulatory framework around standards in the tax advice market.

The new consultation, which was promised back in November 2021 – please see our earlier Bulletin – sets out three possible approaches to strengthening the framework:

• mandatory membership of a recognised professional body;
• joint HMRC – industry enforcement; and
• regulation by a separate statutory Government body.

The consultation also explores approaches to strengthen the controls on access to HMRC’s services for tax practitioners.

It will be of interest to providers of tax advice and services, their clients or potential clients and tax and accountancy professional and regulatory bodies – basically, anyone who may receive or provide tax advice or offers services to third parties to assist compliance with HMRC requirements. This includes, for example, accountants, tax advisers, legal professionals, payroll professionals, bookkeepers, insolvency practitioners, financial advisers, customs intermediaries, charities and other voluntary organisations that help people with their tax affairs, software providers, employment agencies, umbrella companies and other intermediaries who arrange for the provision of workers to those who pay for their services, people who engage workers off-payroll, promoters, enablers and facilitators of tax avoidance schemes, professional and regulatory bodies, and clients, or potential clients, of all those listed above.

However, the Government says that it wants to avoid increasing burdens on professionals that are already robustly regulated. So, it proposes to exclude groups of tax practitioners who interact with HMRC that are already subject to statutory regulation, including those in regulated professions such as legal services, insolvency, audit, licensed conveyancers, and independent financial advisers. The Government says that, as these professionals are already subject to robust regulation, where this regulation extends to the provision of tax advice or services, it proposes to exclude them from this requirement. In detail, this is likely to include (but are not limited to):

• legal professionals providing tax services regulated by an ‘approved regulator’ within the meaning of the Legal Services Act 2007 and Legal Services (Scotland) Act 2010, and the Law Society of Northern Ireland by virtue of the Legal Complaints and Regulation Act (Northern Ireland) 2016;
• professionals who are regulated in accordance with the Pensions Regulator, Prudential Regulatory Authority, Financial Conduct Authority, Insolvency Service, Institute and Faculty of Actuaries, and the Funeral Planning Authority.

The consultation seeks views on:

• potential approaches to raising standards;
• whether the Government should pursue introducing a requirement for paid tax practitioners to be a member of a recognised professional body that supervises their professional standards;
• how professional bodies and the Government can work together to raise standards of tax practitioners;
• which groups of tax practitioners should be in scope or excluded from the proposed option;
• a first step of mandating registration with HMRC for tax practitioners who wish to interact with HMRC on behalf of their clients, and the requirements that HMRC should establish to enable registration.

The consultation asks a number of questions, which are summarised below:

1: Do you agree the limitations in the partial framework across the tax advice market contribute to issues observed? Select all that apply and please give reasons for your answer:

• no requirements of technical competence to practice;
• no general deterrents for dishonest practitioners operating in the market;
• disjointed monitoring of tax practitioners;
• variations in the action taken against substandard and unscrupulous tax practitioners;
• clients being unable to easily assess the competence of a tax practitioner;
• other (please specify).

2: Are there other components of a regulatory framework that would support the delivery of these objectives?

3: Is there anything else that the Government should consider?

4: Do you think the Government should mandate the approach to registration for tax practitioners who wish to interact with HMRC? If no, please give reasons for your answer.

5: What are your views on the intention to apply the requirement to all tax practitioners who interact in any way with HMRC in a professional capacity?

6: HMRC currently applies several checks at the point of registration including: whether the tax practitioner has outstanding debt and/or, returns with HMRC, and the status of their AML supervision. Are there additional checks that the Government should consider for tax practitioners at the point of registration with HMRC?

7: Are there specific criteria or checks HMRC should apply if:

• an individual, who has previously registered a company with HMRC as a tax practitioner, and attempts to register a new company?
• a tax practitioner operating as a sole trader becomes incorporated?

8: Which approach do you think would best meet the objectives set out in chapter 4? Please give reasons for your answer:

• approach 1: mandatory membership of a recognised professional body;
• approach 2: joint HMRC-industry enforcement;
• approach 3: regulation by a government body.

9: What are your views of the merits and problems of the three potential approaches described in this chapter?

10: Are there any other approaches to raising standards the Government should consider?

11: Do you think membership with a professional body raises and maintains standards of tax practitioners? Please give reasons for your answer.

12: What is your view of the capacity and capability of professional bodies to undertake greater supervision of tax practitioners?

13: What more could the professional bodies do to uphold and raise standards for their members?

14: What additional costs may professional bodies face if strengthening their supervisory processes?

15: What is the best way to ensure current and new professional bodies maintain high standards?

16: What role could the professional bodies play in supporting the clients of their members?

17: Should Government consider strengthening customer support options beyond the current complaints processes offered by professional bodies? Please give reasons for your answer.

18: What role should HMRC/the Government play under approach 1: mandatory membership of a recognised professional body?

19: Do you agree that the requirement should only apply to those who interact with HMRC? Please give reasons for your answer.

20: Do you agree that the requirement should only apply to controlling or principals of firms? Please give reasons for your answer.

21: Are there any other regulated professions that should be excluded from this requirement?

22: How can the Government ensure members of regulated professions have high standards in relation to their work providing tax advice or services?

23: What are your views of the proposed exclusions?

24: Do you think the following tax practitioners should be in scope of the requirement to become a member of a professional body member? Select all practitioner types you think should be in scope and please give reasons for you answer:

• charities interacting with HMRC on behalf of taxpayers;
• tax practitioners providing Pro-bono services;
• promoters and enablers of tax avoidance;
• overseas/offshore practitioners;
• other (please specify).

25: What could be the consequences of introducing a legal definition of a provider of tax advice and services?

26: What gaps or issues can you see arising because of this definition?

27: How could unaffiliated tax practitioners be transitioned into professional body membership?

28: Should a legacy scheme be adopted? Please give reasons for your answer.

29: Do you agree a transition period of three years would give sufficient time for the market to adapt to the introduction of mandatory professional body members? Please give reasons for your answer.

30: What future developments would need to be accounted for in implementing mandatory professional body membership?

This consultation closes at 11:59pm on 29 May 2024. HMRC says that it will publish a summary of responses as soon as possible after the consultation period.

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Marriage allowance. A recent update from HMRC on the marriage allowance transfer claim form (MATCF).

As a reminder, the marriage allowance allows married couples/civil partners, born after April 1935, to transfer 10% of their personal allowance if one partner earns an income below their personal allowance of £12,570 and the other partner is a basic rate taxpayer.

So, an individual can transfer £1,260 of their personal allowance to their higher-earning partner, to reduce the amount of tax they pay. This means couples can reduce the income tax they pay by up to £252 (i.e. £1,260 x 20%).

According to HMRC’s latest Agent Update, the new MATCF form is available to view now.

All agents submitting a MATCF repayment claim on behalf of their clients, and who are wanting to receive the repayment directly, will need to use the new form from 26 February 2024. The new form can be found on Apply for Marriage Allowance by post.

HMRC says that the previous versions of the MATCF claim form should have been used until the new version went live on 26 February 2024. Any new forms dated and submitted to HMRC before 26 February 2024 will be rejected.

HMRC has also warned that, from 26 February 2024 onwards, form MATCF needs to be submitted on paper to HMRC exactly as it prints out on GOV.UK. The form should not be amended or changed. However, HMRC has added that,

“…if it is absolutely essential for your internal processes (for example, you need to add a company logo or bar code reference to the form to connect it to your own systems) you may replicate, print and submit the form. You can only make changes in the white space at the top of the form. Any other changes or additions outside of the white space at the top of the form will result in the claim being rejected and returned to the agent, who will need to submit again using the correct format.”

The updated claim form includes:

• a question to ask if the taxpayer is nominating a professional that charges a fee for their services to act on their behalf;
• a space to capture the nominated agent’s Agent Reference Number (if an agent is acting on behalf of a client).

From 26 February 2024, anyone making a claim on behalf of others, or wanting to receive a repayment on behalf of their client, will need to provide their Agent Reference Number when submitting a MATCF form. There is a required field to complete the Agent Reference Number. Failure to add the Agent Reference Number to the designated nomination section on or after 26 February 2024 will result in repayments for valid claims being paid directly to the taxpayer, not the nominated third party.

Clients will also need to have completed the section which informs HMRC whether they are nominating a professional to act on their behalf for the purposes of the repayment claim. Failure to select ‘Yes’ or ‘No’ in the appropriate section could also result in repayments for valid claims being paid directly to the taxpayer, not the nominated third party.

This is all part of an effort by HMRC to prevent taxpayers from being charged excessive fees to obtain small tax repayment claims. Please see our earlier Bulletin. Similar changes also apply to claims for a tax refund for work related expenses, using form P87. Please see: Claim tax relief for your job expenses if you cannot claim online.

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You can sign up for a free 30 day trial of Techlink at anytime.  For more information go to www.techlink.co.uk.