HM Revenue & Customs wants new powers over tax agents (or advisers as we
would say), including reviewing the working papers of an entire client base, to
see if a mistake is systemic or a one-off, and to prohibit communication with
the taxman in a professional capacity.
HMRC explains all this in a consultation document reassuringly entitled
Working with Tax Agents (WWTA). It says that it needs more powers to deal with
agent error, structured avoidance and tax fraud perpetrated by criminal gangs.
The rationale for including the gangs is unclear, but it spreads a little
tarnish over tax advisers.
Analysis of WWTA reveals that HMRC’s case is threadbare at best, resting
largely on argument by anecdote; balanced consideration of the current penalty
regime is conspicuous by its absence.
In brief, WWTA completely fails to prove there is a problem with advisers,
let alone a justification that new powers supply a solution.
This is disturbing in itself, but more troubling still is the risk the
proposals pose to the relationship between tax specialists and HMRC. This is
important, because all large businesses, together with 70% of SMEs, are
represented by tax advisers, as are 60% of self-assessment taxpayers.
Without the careful, diligent work of tax professionals, the entire tax
collection system would founder.
HMRC now wants to rummage through your client records in search of systemic
errors, which may just be down to careless mistakes. This is ironic because most
advisers spend significant non-chargeable time sorting out problems caused by
systemic errors within HMRC’s own systems.
By way of example, look at hmrc.gov.uk/agents/nps.htm. Its systemic problems
include “state pension disappearing from code”, “underpayments from previous
years not carried forward” and “statements sent to the wrong agents”.
The NAO’s 2008/2009 report provides independent evidence of widespread
In PAYE alone “at the end of March 2009, there were 20m open cases… the b
acklog could affect around 4.5m individuals who have overpaid in total some
£1.6bn of tax and a further 1.5m individuals who have underpaid in total some
£400m of tax”.
I don’t expect HMRC to acknowledge its debt to the tax profession for all the
unpaid, thankless work advisers carry out to keep the fiscal system working, but
they shouldn’t throw stones at us from the dubious sanctuary of their
governmental glass houses.
These proposed powers threaten the co-operation between HMRC and advisers.
This would be bad news for government at any time but, in the current economic
climate, with debt rising by £3bn a week, it would be a disaster.
These dangerous powers must be ditched before more damage is done.
Anne Redston is visiting professor in tax law at King’s College,
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