Businesses need action not words over unregulated accountants

Access to reliable professional advice is a lifeline for businesses as they battle existential threats on all sides.

September: back to school, but not just for the start of another term. The country is adjusting to a new Prime Minister, a new government and a new Monarch. Change is in the air.

A raft of pressing issues demands the new government’s attention: soaring energy costs, rampant inflation and the threat of recession. Alongside these is the urgent need to ensure businesses get the support they need to weather yet another crisis.

Another consultation over standards

It’s in that context that HMRC will be issuing its latest consultation on raising standards in the tax profession. Over the coming months, the issue of qualified tax advisers will be debated, and it’s a process that AAT says is overdue. In short, it is imperative anyone offering tax advice should be required to be a member of a recognised professional body.

The reason is simple: the value and importance of good advice intensify in a time of crisis.

Smaller businesses face existential challenges: spiralling energy costs leading to inflationary pressures, sluggish growth, late payment, tight labour markets and the continued repercussions of Brexit.

Faced with rampant uncertainty, businesses cannot be sure of the quality of the services they are buying.

Lack of professional standards

HMRC’s own research confirms this. A survey by Kantar, revealed the “different ‘standards’ unaffiliated agents said they followed in their day-to-day work”.

Just 4% follow the Professional Conduct in Relation to Taxation (PCRT), which members of recognised professional bodies abide by. And only 18% follow HMRC’s standards of tax advice, which it says all agents should adhere to (45% said they were unaware what the standard actually was). The most common answers were that unaffiliated agents worked to their own code of conduct, or did not follow any professional standards.

Lack of qualifications

The same survey showed that four out of five unaffiliated agents do not hold a professional qualification. In fact, 29% have no qualifications at all. Set this against common perceptions – surveys repeatedly show that MPs, corporations, small businesses and the public hold the comforting belief that all accountants must be qualified.

Taken together, this paints a worrying picture of consumers exposed to enormous risk. It also shows that simply expecting voluntary adherence to HMRC standards across the board isn’t an

effective strategy.

Lack of assurance

AAT is not suggesting that all unregulated accountants are incompetent or unprofessional. But we are saying that there is a problem guaranteeing consumers a consistent service, and giving them redress. Once again, the facts make this plain. Unregulated accountants account for one-third of the profession, but two-thirds of complaints to HMRC.

This is not a new situation. But, as HMRC drags its heels to implement a suitable solution, it is one that is arguably getting worse. Last year, a survey of AAT members revealed seven out of 10 had dealt with businesses suffering problems from unregulated accountants. 44% said the situation had got worse in the pandemic – a very vulnerable time for businesses.

Momentum building for change

Thankfully, there is a growing consensus that reform is urgent, with an increasing number of stakeholders recognising the opportunities and benefits of mandating professional body membership for tax advisers.

Critically, that extends to legislators. Our research, carried out by YouGov (published last month), revealed that an overwhelming majority of MPs (82%) believe that anyone offering paid-for tax or accountancy services should be appropriately qualified. And it’s worth pointing out both that support for reform was equally strong amongst the two main parties (Labour 81%, Conservative 81%), and that a large number of MPs were unaware that advisers didn’t have to be qualified.

These legislators will be serving in a parliament that may be under pressure to deliver the ‘bonfire of regulations’ that the new PM has promised during her campaign. Many MPs (of all parties) will be hesitant to endorse anything they perceive adds to red tape.

Compulsory membership – the practical way forward

The good news is AAT is proposing a ready-made solution that can provide this protection without layers of bureaucracy. Simply mandate that agents must be members of a relevant professional body. It’s a requirement that is already in place for 200 other professions. The same should apply to accountancy.

The economic headwinds facing UK firms now make the argument impossible to ignore.

Adam Harper is AAT's Director of Professional Standards & Policy..