Who am I?

KEY POINTS

• Self-serve could save time, cost and frustration.
• Requirement for agents to enrol with HMRC.
• Judging agents on basis of clients’ compliance record.
• Difference between enrolment and regulation.
• Have your say on the proposals.

I am a chartered accountant and a chartered tax adviser. I worked hard for, and I am proud to have, the letters FCA and CTA (Fellow) after my name.

They tell those I deal with, my clients, prospective clients and HMRC particularly, that I have attained and maintain a high level of technical knowledge, that I accept the ethical and professional standards of the two institutes, that I will accept the disciplinary consequences if I ever fall short of the standards to which I subscribe, and that I carry professional indemnity insurance for the protection of my clients.

I am a partner in a practice in the west country; over recent years, I have witnessed from the practice ‘coal face’ the decline in HMRC’s service standards. I am fed up with incorrect PAYE codings, with the delays in answering post, with allegedly ‘lost’ letters, with aggressive debt collection letters (especially where no debt is due) and with delays in processing forms 64-8.

I want to get back to feeling that my professional qualifications matter and that I can expect to see HMRC’s service standards improve so that we can all play our part in delivering effective and efficient tax administration for the UK and for our clients.

So I have read HMRC’s consultation document Establishing the Future Relationship Between the Tax Agent Community and HMRC with more than academic interest.

The consultation

In the foreword to the consultation, Melanie Dawes, HMRC’s director general business tax, says HMRC’s ‘partnership with agents – paid and unpaid – is essential for successful tax administration in the UK’. She goes on to say that the department:

‘wants to make its engagement with all agents and their clients as easy as possible, so as to reduce the costs for the customer and their representative, as well as reducing the costs HMRC would incur in dealing with those customers directly.’

I am more than pleased to see those statements right at the start of the consultation document. I am also happy to see that the importance of the role that agents play is reiterated a number of times subsequently.

Representatives of the main professional bodies (the ICAEW, CIOT, ICAS, ACCA, CAI, AAT and ATT) have held numerous discussions with HMRC to emphasise the point. So having recognised the vital role that agents, i.e. people like you and me, play, what does HMRC’s new agent strategy envisage? The executive summary suggests the following:

• secure enrolment and segmentation of tax agents to differentiate between those who are in business and those in the voluntary sector or acting on behalf of friends and family;
• reducing time and cost for all parties by making it easier for all agents to access the services they need and by increasing their ability to self serve on behalf of clients where appropriate;
• tailoring HMRC’s support services to paid, professional agents to reflect the compliance risks inherent in their client portfolio;
• providing additional support for agents whose own standards are below those expected in the professional community; and
• tackling more effectively those few agents who are found to be acting dishonestly.

Time and cost

As I began by criticising HMRC’s service standards, I will take this aspect first. The consultation document acknowledges that agents’ ‘experience of HMRC services is mixed’ and that while ‘some welcome the advances made in the provision of online services and dedicated agent services such as the agent dedicated telephone helpline... others [are dissatisfied] with the quality of service for some of their basic transactional needs’.

The document recognises more than our dissatisfaction, it recognises the impact of poor service delivery on us and on our clients and that it ‘can lead to non-chargeable time, or more seriously can damage the agent/client relationship’.

The impact of service issues has therefore been explicitly acknowledged. HMRC then set out some proposals to help resolve, or to begin to resolve, the problems.

At the heart of the proposals is the belief that ‘significant time can be saved for both agents and HMRC if agents are put in a position where they can control and execute a number of basic transactions on behalf of their clients’.

This idea of a ‘self-serve’ facility for correcting PAYE codes and other basic transactions that currently waste significant amounts of time is something that the ICAEW’s Tax Faculty has lobbied for actively and, as a practitioner, I welcome it.

I would much rather log on to HMRC’s system and make a change to a PAYE code myself than waste time hanging on the telephone, explaining what I want to someone who will be very polite but will all too often not understand what I am asking for.

This idea could save my practice significant amounts of time, as well as significant amounts of frustration for me, my colleagues and my clients.

There is nothing particularly new, however, about trusting what an agent does online: we have been submitting self assessment returns this way now for well over a decade and HMRC have simply operated a process now/check later approach to submitted data.

Extending that approach seems to me to make extremely good sense.

If all HMRC do is process the transaction I am telephoning or writing about, why not let me input it directly and save us all time, cost, frustration and the opportunity for error?

The specific proposals are:

• Self-authorisation: the ability to notify HMRC systems that agent A is acting for client B without the need for HMRC to receive a signed authority. The authority would be retained by the agent for inspection.
• Ability to generate and amend notices of coding and manage end of year reconciliation for those outside of self assessment.
• The facility to see payments and liabilities across all taxes, for a single client in one presentation of the information.
• Online education modules to augment professional training on legislation changes and processes.
• Track and trace facilities for paper repayment claims and correspondence.
• The ability to lodge correspondence and returns and forms that are not fully online via an electronic work area.

When I think about the amount of time we currently waste at my firm waiting for 64-8s to be processed, telephoning and writing to HMRC and clients regarding PAYE codings and allocation of payments and indeed chasing replies, these ideas look very attractive. My firm will certainly consider volunteering to act as a trial site when HMRC begin to pilot these ideas.

So far, so good then.

Safeguards

HMRC envisage that allowing such access will necessitate safeguards. I would expect this. If we are allowed to ‘self authorise’ there must be a mechanism to ensure that the client has in turn authorised us to do so.

With increasingly sophisticated cybercrime, it is also sensible for HMRC to ask for reassurance that an agent using an enhanced online facility – and the consultation document suggests incidentally that it will still be possible to engage with HMRC without using this facility – has adequate standards of IT security.

I would expect that any practitioner or practice engaging in business activity online would want to do that anyway, so if this initiative facilitates the creation of a recognised industry standard for IT security and an agreed set of processes for safe retention of credentials, that would be a positive development.

The consultation paper then sets out a proposal for ‘enrolment’ of agents. I can see that it makes sense for HMRC to want to know who they are dealing with if they are to allow this enhanced level of access (or perhaps in any case), but is that all that is proposed here?

Enrolment would apparently entail providing details of the agent’s business name and address, telephone number, email address, details of a designated bank account for client tax repayments, details of the business owners and their professional body membership details. This is all routine information.

The point at which I hesitate is ‘the relevant HMRC unique identifier(s) of the agent for their own tax affairs and confirmation that they have met their relevant tax obligations to file returns and meet liabilities’.

Is it really necessary for HMRC to factor in something personal about me which is unconnected to my business or the way I operate it? I remain to be convinced that this is needed.

What would HMRC do with the information, apart from accepting it as the key that allowed us to enter the new ‘trusted’ relationship? It would apparently create an ‘agent view’ for enrolled agents.

This would bring together details of the agent and their client portfolio to create a consistent and coherent picture ‘to support communication and engagement... [and to]... support HMRC in identifying those agents whose total engagement is significantly outside of the average performance for agents with a similar client portfolio’ and help to ‘identify agents with high standards in their field, agents who need help to improve their standard of work, and the very few agents who act dishonestly’.

HMRC acknowledge that they would have to apply ‘significant care’ here and specifically ask for views on the safeguards needed, including for example the ability of agents to ‘challenge the correctness of the information gathered, the validity of the conclusions drawn and the resolution proposed’. Transparency and mutually agreed – not unilaterally imposed – standards and safeguards would be needed.

The document then examines the difference between the client’s responsibilities and the agent’s, saying that ‘while the agent can verify the information that is provided by their clients, they are not in a position to confirm that their client has acted in a compliant manner or provided all of the information required to ensure the accuracy of a return or claim’.

It is also recognised that agents ‘regularly support clients whose record keeping is poor and whose compliance with statutory obligations is weak’.

These are really important points. A fundamental part of the adviser’s job is to help clients comply with their tax obligations and, at times, to encourage potential clients who have not complied to become clients who will comply.

That is something that the profession does very effectively and it is in HMRC’s interest that agents should be encouraged to do so.

I am therefore concerned that there is a suggestion that the information used to create the agent view might ‘include filing and payment profiles of client portfolios, as well as the level and type of cases selected by HMRC through its risk assessment processes’.

If I am to be judged on the compliance performance of my clients I might just decide that I no longer want to help the non-compliant become compliant and that it might be better for me to only take on ‘easy’ clients. Life would certainly be less stressful.

In fairness, the consultation document does acknowledge this risk: ‘HMRC does not want to create a situation where the compliance of clients is the determining factor in the “agent view” as that may result in less compliant clients being refused access to agent services and their compliance falling further’.

It is proposed that the information would be made available to the agent. This is an aspect that will need to be addressed in further discussions. If HMRC staff were to be judged not on the basis of their own performance but on that of the people they dealt with, I suspect that those engaged in investigations would be pretty unhappy about it: they would rightly say that it was an unfair and irrelevant measure of their own performance, competence and trustworthiness. I feel the same way.

The proposal is that enrolment could be:

• Mandatory or optional (but HMRC’s proposal is that all paid agents should enrol).
• Rolled out at a set point in the year or staggered over a set period of time.
• Introduced on an incremental basis.

The ghost on the stair

Is enrolment really just a roundabout way of HMRC seeking to regulate agents? The consultation document says specifically that ‘HMRC believes that structured self governance of the tax agent market is the correct model for a future relationship’.

The problem is that around 30% apparently do not belong to a professional body that imposes standards of behaviour and competence. HMRC are ‘keen to explore the scope for requiring tax agents to hold a relevant qualification… as well as considering the options for meeting ongoing professional development and governance needs’.

Rather than an attempt to impose direct or indirect regulation of the tax profession by HMRC, the approach seems to be aimed at finding a way to encourage more agents to join professional bodies and to sign up to the ethical and technical standards that go with this.

While accepting the client’s right to choose their agent, HMRC think that ‘there could be value in all tax agent firms operating in the UK being expected to meet or exceed a minimum level of competence and professional conduct’.

Some may find that a controversial idea, but personally I think that anything genuinely aimed at improving standards for all taxpayers seeking assistance with their tax affairs has merit.

What is not clear to me is precisely how the existing self-regulation for those who are already members of professional bodies might be extended to those who are not and what minimum ethical – perhaps adherence to professional conduct in relation to taxation – and technical standards might be set and how and by whom they would be enforced. These are questions for another article.

Back to the future

Going back to where I started this article, I see in this consultation an opportunity to reduce some of my daily frustrations with service levels, to see my qualifications recognised by HMRC as demonstrating that I work to high professional standards and to engage in a debate about improving standards of tax compliance. I also see some issues that will require careful and cautious exploration and about which I remain to be convinced.

This consultation is an important one for the tax profession. The ICAEW will be asking members to say what they think via the Tax Faculty and at meetings and events. I would encourage you to put aside half an hour to read the document, to think about what it says and to have your say.

The outcome of this consultation will affect the rest of your professional life, and the questions it poses are far more than just philosophical.

Paul Aplin OBE FCA CTA(Fellow) is a tax partner with A C Mole & Sons and chairman of the ICAEW Tax Faculty technical committee. The views expressed here are Paul’s own and not necessarily those of the ICAEW or of his employer.

Issue: 4307 / Categories: Comment & Analysis , working with tax agents , Admin