Why we are so enthusiastic about the prospect of accountability for all tax agents.

The government’s recent announcement of its consultation into strengthening the regulatory framework to raise standards in the tax advice market was a welcome sign that the central element of AAT’s Accountable campaign may be about to bear fruit.

The next two months will see a consultation into the best way to improve the service to clients through higher quality tax advice and tax services and therefore establish greater trust in the tax advice market. The government says it is determined to improve clarity, transparency and enforcement around tax advice, and as part of the consultation, has suggested three possible routes to achieve this.

And while it’s right that stakeholders consider the merits of a hybrid approach of joint HMRC-industry enforcement and the creation of a government body to oversee the regulatory regime, we remain firmly behind the best and most workable option – that is, to introduce mandatory professional membership for those working in tax advice.

Mandatory professional membership

Under this approach, the consultation sets out, “Professional bodies would be responsible for using existing supervisory processes to ensure new and existing members consistently meet expected standards and necessary action is taken if not.” These bodies could also “be responsible for providing routes for customer support and be the first point of contact for a client wishing to complain.”

The arguments for reform are well rehearsed, but put simply, this is a problem that requires a real and lasting solution. AAT’s Accountable campaign has spelled out the numerous problems created by the current system but there are several key salient points to remember.

Lack of regulation leads to huge problems

First, two-thirds of complaints to HMRC about tax come from the third of the accountancy profession which is unregulated. Second, businesses – and smaller businesses in particular – are the most impacted by the current framework.

Consider the fact that, according to our research, 51% of small businesses have had to hire a qualified accountant to correct the mistakes of a previous unqualified accountant. Additionally, 68% of AAT members say unregulated accountants had previously caused their clients harm, leaving some individuals and businesses facing bankruptcy.

Finally, the issue points to the broader economic harm being caused: with 42% of small businesses reporting losing money due to poor accounting and 45% (or £16bn) of the tax gap comprised of taxpayer error and failure to take reasonable care, the impacts of the current system are felt across the board.

So, while mandatory professional membership would be of immediate benefit to business and taxpayers, it will also do a great deal to enhance the credibility of the profession as a whole.

Standing up for standards

Bringing unregulated tax agents into a proper framework would support the creation of a level playing field in the tax market, ensuring that everyone offering tax services is appropriately qualified. All the tax practitioners, in being regulated by a relevant professional body, will have to meet high standards in order to be able to practice.

Not only will this establish minimum standards, but it will also deliver improved monitoring and effective enforcement resulting in better customer support. It is also worth noting that in a time where HMRC is under exceptional pressure to deliver its mandate with fewer resources, introducing better standards of tax compliance and advice through mandatory membership would inevitably ease the enforcement and compliance burden on the embattled Revenue agency.

Any significant regulatory reform has its costs, and whilst the consultation is limited in its assessment of those costs, when compared to the hybrid or government-led model, compulsory membership does have the benefit of building on an existing model. And while it would require a period of transition for the bodies to develop mechanisms to onboard those tax advisers that are currently unregulated – and time for those tax agents to demonstrate/attain the necessary standards of professionalism – the costs would be initially borne by the professional bodies.

Grasping the opportunity

After many years of campaigning on this issue, the opening of this consultation is a major win for our Accountable campaign. It marks what we hope is the beginning of a new era of professional standards regulation in the tax arena, and one that will ultimately see the introduction of compulsory professional membership. We are determined to continue to lead the effort to deliver that outcome, and to do so we need our members to speak up.

Whether you’ve been faced with having to sort out issues new clients are encountering after receiving poor tax advice from their previous accountant, or are frustrated at the erosion of professional standards in your profession, this is the time to get involved. Those of you working on the front line know all about the harm caused by substandard or unscrupulous practitioners under the current framework. You will also recognise the reputational impact that unregulated tax agents can have on the profession. So speak up.

With all this in mind, the consultation is a welcome step in the right direction, and represents a golden opportunity not only to raise standards across the industry but also to make sure that AAT’s vision of a rigorous, dynamic and sustainable regime becomes a reality.

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