NAO report on tax agents buries the truth

This week, the National Audit Office report “Engaging with tax agents”
spawned the highly damaging headlines “NAO Criticises Tax Agents” in the
Financial Times and “Taxpayers with Accountants Get Their Returns Wrong
More Often” in the Guardian. Understandably, many accountants and tax
advisers – me included – found this more than a little offensive, all the more
so because the NAO’s findings were based on data over five years old, looked
only at under declarations (ignoring over declarations) and defined “agent” as
someone authorised and paid to act on another’s behalf in their dealings with
HMRC, making no distinction between members of a professional body and
unqualified agents. Anyone who spent years working hard to pass examinations,
who accepts the responsibilities of belonging to a professional body and who
spends as much of their time telling clients what they cannot claim for tax as
telling them what they can will have been particularly disappointed by all this.

The sad thing is that the NAO report was far from unremittingly critical of
agents. It says explicitly that tax agents can have a positive effect on tax
compliance. It is possible, the report says, that without the intervention of
tax agents, the level of non-compliance would be higher and, indeed, that it has
found no evidence that tax agents are supporting non-compliance. In fact it says
many other positive things about tax agents, reinforcing the findings of the
2008 OECD study into the role of tax intermediaries. But by giving such weight
to the finding that “self assessed income tax returns filed by customers
represented by agents are more likely to have under declarations (resulting from
error, failure to take reasonable care or evasion) than returns filed by non
represented taxpayers” in the press release that accompanied the report, it was
pretty obvious where press attention would focus.

Less than half the number of words devoted to these “findings” in the press
release is given to what I see as a far more important issue: HMRC currently has
very little information to enable it to distinguish between tax agents
associated with higher or lower rates of compliance. The NAO recommends that the
department should make a case for investing in systems to enable it to do this.
It notes that that HMRC has increased the levels of under declared tax recovered
from large business corporation tax cases by focusing resource on higher risk
cases. If HMRC does make this investment, maybe the NAO can, in future, work on
a properly segmented analysis of the agent population and direct its fire more
accurately than it has done in this report. If there are agents producing shoddy
work then it is everyone’s interest that HMRC can identify them, deal with them
and leave the vast, vast majority who do a good professional job alone to get on
with it.

There are other sensible recommendations in the report. What a shame that
whoever put the press release together decided to focus attention where they
did.

Paul Aplin is a tax partner with A C Mole & Sons and chairman of the
ICAEW Tax Faculty’s Technical committee. The views expressed here are his
own.