UK Tax Advisory Market: Experts Debate HMRC's Regulatory Proposals

Proposals by HM Revenue and Customs (HMRC) to bolster standards within the advisory market have garnered support and scrutiny from experts in the UK. Following HMRC's release of an open consultation in March, discussions have centred around the urgent need for a fortified regulatory framework governing tax advisers. The consultation, which underscores the UK government's commitment to enhancing standards, outlines three potential avenues for reform: mandatory membership in recognized professional bodies, joint enforcement efforts involving HMRC and industry stakeholders, and regulation by a distinct statutory government body.

Jonathan Main, a VAT and indirect tax partner at UK accounting group MHA, actively participated in the consultation process, emphasizing the long-overdue necessity for regulatory intervention in the tax advisory sector. Main articulated concerns about the reputation of the market, particularly highlighting the presence of boutique firms whose practices might undermine trust. He emphasized the need for formal qualifications, akin to those in allied professions like auditing and law, to uphold professionalism and competence. Main stated, "My role was to attend a working party meeting organized by HMRC to debate a number of questions they had regarding the form that any regulation should take." He added, "If you want to be an auditor, you are required to be a chartered accountant and you’re regulated by the Institute of Chartered Accountants … If you want to be a lawyer, you need the relevant legal qualifications."

Yash Rupal, head of the UK tax practice at law firm Simpson, Thatcher & Bartlett, echoed Main's sentiments on the necessity of regulation within the tax advisory realm. However, Rupal delved deeper, questioning the efficacy of regulatory bodies in addressing nuanced challenges related to adviser conduct. While acknowledging the need for oversight, Rupal expressed reservations about HMRC's proposed role, citing potential bureaucratic hurdles, especially for advisers with infrequent interactions with the tax authority. Rupal stated, "However, I also say the idea HMRC should have any role in monitoring tax advisers is fundamentally wrong in principle."

The consultation, which remains open for responses until May 29th, has sparked a robust dialogue among stakeholders regarding the future trajectory of the tax advisory market. While opinions vary on the most effective regulatory approach, there is a consensus on the imperative need for action to uphold standards and restore trust in advisory services. As the deadline for responses approaches, the industry eagerly anticipates HMRC's decisive steps toward reshaping the regulatory landscape.

One of the key proposals within the consultation is the mandate for advisers to register with HMRC, aimed at ensuring practitioners meet basic standards while interacting with the tax authority on behalf of clients. While some view this as a necessary step towards accountability, Rupal argues that it could result in unnecessary bureaucracy, particularly for advisers with less frequent interactions with HMRC.

Overall, while there may be concerns about the potential challenges posed by HMRC's proposals, early indications suggest a widespread recognition of the need for increased rigor in the market. As stakeholders continue to engage with the consultation process, the industry remains poised for transformative changes aimed at fostering greater transparency and professionalism within the tax advisory sector.

By fLEXI tEAM