Public sector auditors are at loggerheads with tax advisers after releasing a
report claiming more people under-declared their tax bills after receiving
advice from “agents” compared to those who fill in self-assessment forms by
The report, compiled by the National Audit Office, estimated that a minimum
of £2.6bn could be lost by the Exchequer because of underpayments by people
advised by a tax adviser and suggested the maximum loss could run as high as
Tax advisers believe the report provides a skewed picture, damaging the
reputation of the profession, because the number of advisers without accountancy
qualifications was not considered by the NAO.
The report looked at a sample of approximately 5,000 cases from where HM
Revenue & Customs had reviewed tax returns to establish if there were
The audit body reported 37% of self-assessed income tax returns from people
who employed tax advisers had under-declared liabilities compared to 26% of
returns filed by taxpayers on their own.
The figures were used as a platform to suggest more should be done to clamp
down on poorly-performing advisers.
Members of the tax profession angrily countered the claims, pointing to flaws
in the NAO’s study.
Advisers said the report, released today, did not take into account
overpayments of tax through HMRC error and the figures used for the
extrapolation could not be relied upon because the sample was taken from
“They’ve taken two plus two and come up with £2.6bn,” said Paul Aplin, a
senior figure at the ICAEW. “This is a hugely counterproductive report with very
Aplin added that the report also defined a tax agent as anyone authorised by
a client to handle their self-assessment forms, which brought unqualified
individuals into the net.
“There’s no way of knowing how many unqualified individuals are doing this w
ork,” Aplin said.
The NAO admitted that the figures did not consider over-declarations and
recognised that “if it were not for the work of good agents in ensuring clients
get their tax right, the level of under-declarations could be larger”.
“Nevertheless, the analysis indicates there could be an opportunity to
increase tax revenues by providing better support to tax agents and by better
targeting of poorly-performing agents,” the NAO added.
Eight million taxpayers receive help from third parties in completing and
filing income tax and corporation tax returns each year, the NAO said in the
HM Revenue & Customs estimates that third parties are responsible for
filing around 65% self-assessed income tax returns. This amounts to about 43,000
Simon Braidley, president of the Association of Taxation Technicians, said:
“Where we are particularly disappointed is that our members will see this as a
missed opportunity to properly analyse the type of errors, who are making the
errors and why.
“Without this information, how can we properly engage with HMRC to help
improve the situation?”
The NAO admitted the analysis was based on self-assessed income tax returns
filed by 236 taxpayers represented by the top 100 firms, 2,640 taxpayers
represented by “other” firms, and 1807 unrepresented taxpayers.
“The difference between the proportion of under-declarations on returns filed
by the largest 100 firms and other firms is statistically significant,” the NAO
“There seems to be a lot of artistic license in this report. It’s the
unqualifieds who need to fall into line,” said Chas Roy-Chowdhury, head of tax
HMRC said: “We welcome the NAO report and its recognition of the steps
already taken by HMRC to improve its engagement with tax agents.
“HMRC has a collaborative relationship with the tax agents community and will
work with them to reduce costs, increase compliance and improve customer
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