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KEY POINTS
- HMRC’s consultation document on the department’s relationship with agents.
- The need for a better understanding.
- Could agents operate a ‘self-service’ for clients?
- Establishing an ‘agent view’ and the support required.
- Responses to the condoc are requested.
Tax agents are an essential part of the UK tax system and play a key role in compliance and administration. Your involvement helps HMRC avoid cost and risk that would apply if we were dealing directly with clients and we share a common purpose in ensuring that customers get their tax right.
As HMRC publish their consultation, Establishing the Future Relationship Between the Tax Agent Community and HMRC, on the tax agent strategy, I am delighted to be offered this opportunity by Taxation to engage the tax agent community in a balanced and honest dialogue about how we each see our future relationship.
I encourage you to read it in detail in order to understand the proposals which HMRC are seeking comments on.
The strategy has been based on a considerable amount of professional research and is also informed by our current engagement.
However, it is important that we understand how tax practitioners see the issues and the solutions.
The new strategy
The tax agent strategy has been devised to complete HMRC’s strategic development for the main customer groupings we deal with, so that we are consistent in the way that we prioritise our resources, tailor services and respond to customer needs.
There are around 43,000 practising agent firms in the UK serving eight million customers split roughly 50:50 between businesses and individuals.
Agents’ ability to transact quickly and effectively with HMRC is a shared aim. Incorrect actions as a result of information that passes between us waste time and can affect the relationship between the agent and client and ultimately with HMRC.
Many will reflect that the relationship between agents and HMRC was better ten to 15 years ago when tax was administered largely on a geographical basis.
There are elements of that relationship which it would be right to renew, but we also need to recognise that the environment in which we now all work has changed markedly.
Those with good relationships with a local office would have enjoyed the facility of regular contact and flexibility in the speed of dealing with clients.
For others, the relationship may have faltered and been difficult to repair. Within the guidelines that existed it was distinctly possible for local variations to have arisen and for some agents to feel that they were not being treated on an equal footing with their peers.
Changing roles
Over the past decade different business practices, technologies and expectations have all required the tax agent profession and HMRC to modernise their approach to tax administration.
There has been greater recognition of the important role that agents play, which has led to more consultation, regular dialogue with representatives, and the creation of differentiated services to meet specific segment needs such as dedicated helplines, account managers and joint learning.
But as we look across HMRC operations, our customer understanding and international comparators, it is clear there is a better way of doing business together.
The key is for HMRC to trust agents to correctly represent their clients and settle their tax affairs with less involvement from us.
In many ways the direction of the strategy is obvious, but when it comes to the way it is developed and implemented we need to be acutely aware of the unique nature of our existing relationship.
HMRC do not require a tax agent to be qualified to do business with us nor do we require any form of professional standard or governance to be observed.
This would be unusual in other tax administrations where qualifications and/or membership of a body are clear requirements.
The next ten years
The tax agent strategy outlined in the consultation is about looking forward ten years to see what the future HMRC/agent relationship will be.
We intend it to be transformational and to offer the opportunity for agents to enjoy a completely new role. At the heart of the strategy is the principle of trusting agents to work in a professional way without HMRC controlling every process.
Outside the paid agent community we are aware that the voluntary sector and friends and family members play an important role in supporting some of HMRC’s customers.
Alongside the proposals in the consultation document for the paid agent community we also want to explore how a better service (and easier access) can be provided to this group.
Balancing their ability to resolve things quickly while ensuring that customer confidentiality is protected is a real challenge, but one we are determined to address.
There will be further work and trials with partners in the voluntary sector to understand how we can best meet their needs and where many of you will have an interest in bringing about change.
In summary, our tax agent strategy is built on two concepts: trusting advisers to resolve their clients’ affairs and creating an understanding of each agent’s engagement across their entire client portfolio.
A better understanding
The consultation document sets out three main areas where we are seeking views on acceptability and practical implementation over the next few years.
The first of these involves HMRC acquiring a much better understanding of who our agent community are. In addition to not requiring qualifications or governance, the information we require from an agent when they register to do business with HMRC is very limited.
In future we would like to know more about tax agents so we can better target support and reduce the risk of fraud. While we have outlined the information we think would be useful to underpin this process it would be helpful to hear the agents’ views of the information that could be readily provided and which would make systems more secure.
For instance, we do not currently request a nominated bank account for client repayments or ask for confirmation that an agent is known to HMRC for tax purposes.
Enrolling tax agents and creating a new record for each will also offer us the chance to clean the existing database which includes historical data where agents have subsequently merged or changed their trading names.
So a very early outcome will be a chance to ensure that the right clients are properly recorded against each agent. The database will also provide an opportunity to reduce the need for security checks each time an agent calls HMRC if, for example, we can use shared secret information.
Self-service
The second area where we are seeking views is on the creation of a self-serve facility. Many tax authorities around the world offer a certain level of self-serve to agents.
The UK is no different and offers agents access to view information in certain areas and filing/registration facilities to agents.
The tax agent strategy proposes that, for a number of basic transactions such as authorisation to act on behalf of clients and coding notices for PAYE, agents should be able to control the transaction from start to finish, retaining backing evidence in their files.
So, for example, an agent could use the letter of engagement with their client as evidence of their appointment to deal with certain taxes. They could then allocate the client to their client list without having to submit a form 64-8 as they do now.
Similarly, agents could generate notices of coding to be issued to clients and employers without needing to involve HMRC.
Safeguards will be needed to monitor activity in real time to prevent fraud and to protect customer information, but we would see this as an extension of the self assessment regime where an agent determines the tax liability of a client without HMRC needing to agree the position.
There may be other services that lend themselves to this approach and we would welcome agents’ thoughts on these.
This is not about transferring costs to the agent, but about transferring control of the transaction to the agent as the authoritative point of knowledge. We do not see it as a compulsory way of doing business in the future, but believe it will save time and cost for all.
We are conscious that there are varying levels of awareness about online fraud (and indeed IT) across the profession that illustrate the different needs for using this technology.
To use the new self-serve facility, agents might need to meet additional security requirements to protect themselves and their clients and we would welcome agents’ views on the level at which assurances would be needed.
Engaging the agents
The final area for consultation is about gaining a better understanding of the total engagement an agent has with HMRC. At present, the agent is not considered as a customer in their own right.
This means that every time they need to contact us about a client they are required to validate who they are. It also results in HMRC adopting a very general approach to providing support and information.
The tax agent strategy proposes the creation of an ‘agent view’ for each enrolled agent which brings together their details and those of their client portfolio.
We believe this would provide HMRC with a much better understanding of a particular agent’s needs and the portfolio of clients they serve. It would allow us to target specific communications on changes in legislation or processes to those agents who are most likely to be affected.
It would also enable us to build a picture of each segment to identify any agent acting outside of the norms for those clients.
This is a difficult area to develop as we are not only looking at an agent’s performance, but also at their clients’ performance.
While an agent might influence the behaviour of some of their clients to a degree, it would be wrong to judge an agent’s performance simply by the compliance record of some of their clients.
We will need the assistance of the profession to develop an understanding of what ‘good’ is and how we might apply it in practice.
Establishing an ‘agent view’ will assist HMRC in identifying the minority of agents whose standards (knowingly or unknowingly) fall below what we would expect from the tax agent community.
We will also need to consider what support can be offered to this group by HMRC or their member body (if relevant) and, beyond that support, what sanctions might be appropriate.
The need for governance
This is the start of a debate that returns to the scene setting at the start of this article and recognises that neither qualification nor governance is currently a requirement for agents to work with HMRC.
We are clear that it is not HMRC’s intention to regulate the market, but we are keen to hear views on the need for governance and the form that should take.
In the consultation document we are asking whether the current model is the right one for the future or whether more confidence can be gained by the profession, customer and HMRC by requiring qualifications, continuous professional development and some form of self-governance as a prerequisite for business.
There are no simple answers as even the larger member bodies operate to different protocols, and we would welcome views from across the profession on the pros and cons of any proposed changes.
The consultation document raises some fundamental and difficult questions about the nature of HMRC’s relationship with tax agents, but we believe the time is right to address them.
By proposing to extend the role of tax agents, HMRC recognise the value that the profession contributes in representing their clients and resolving their tax affairs.
However, to fully reflect the trust that HMRC propose offering we must be able to confirm who we are doing business with and be able to monitor the extent of an agent’s engagement.
That will reduce the risk of fraud or wrongdoing for all parties. We believe that the tax agent strategy provides an opportunity to improve the system and relationship in a way that simply cannot be achieved by merely changing processes.
In terms of the scope of the strategy, the pace, and prioritisation of the different elements, we are at the proposal stage.
Responses to the document will influence the outcome of this work and I would encourage you to contribute your thoughts and ideas either direct to HMRC through the routes outlined in the document or via your representative bodies and Taxation.
I look forward to hearing from you.
Brian Redford of Business Customer & Strategy Directorate and HMRC lead for the Tax Agent Strategy.
Responses to the consultation document can be sent via Taxation's online questionnaire or directly to HMRC by email or post: Agent Strategy Team, HMRC, Business Customer & Strategy, Floor 7N, South West Bush House, Strand, London WC2B 4RD.
