Key priorities HMRC must keep in mind

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Ahead of the Chancellor’s Spring Statement, we consider priority areas for the profession.

As a professional membership organisation, AAT has a number of roles. We maintain and improve professional standards, represent the voice of the profession across business and the wider economy, and take a leading role in advocating for the interests of accountants with government and other regulators.

With the Chancellor’s Spring Statement approaching, it seems apposite that we outline some key areas which we believe to be priorities for the profession. All of these have several elements in common: they are all important and urgent; they all require engagement from government, HMRC, business and professional bodies; they are all long-term systemic challenges that must be reckoned with. And finally – and most importantly – they are all likely to be enhanced by a properly regulated accountancy profession where standards are rigorously maintained and applied across the board.

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Tax simplification

The first is tax simplification. We have lobbied hard in a variety of forums to drive this agenda, with a straightforward message: a simple, fair and effective tax system benefits everyone in the country. That’s not just a matter of reducing the burden on business – and smaller ones in particular – it’s also vital to the health of the UK economy. The staggering fact that the failure to take reasonable care and taxpayer error represented 45% (or £16.2bn) of the tax gap in 2021-22 sums up why this should be an urgent priority for the government.

Making Tax Digital

The second area is Making Tax Digital (MTD). The postponement of the introduction of MTD for Income Tax Self Assessment (ITSA) in December 2022 was another delay in a journey to a digital tax system that has become increasingly painful. Stakeholders are losing faith and patience – the fact that 85% of AAT Licensed Accountants believe the ITSA registration process was not well understood or was only understood with the help of an accountant or other professional says it all.

As we’ve previously made clear, it’s essential that MTD returns to its original objective of delivering a simpler, faster system that will be easier for all to use. A more efficient system is beneficial both to HMRC and taxpayers. HMRC must also stick to its revised MTD timeline, allowing no further delays.

Supporting SMEs

Third is tax reform to support SMEs. There’s no doubt that SMEs face disproportionate administrative burdens on tax compliance relative to their turnover. Simplifying the tax for SMEs can improve compliance and productivity, so we are in full support of greater promotion of tax relief and clearer guidance from HMRC.

Improving professional standards

Finally, the drive towards Increasing Professional Standards in the Accountancy Profession must be maintained. With unregulated accountants making up one-third of the profession but accounting for two-thirds of complaints to HMRC, this is perhaps the most fundamental and pressing issue. Without addressing it, none of the above problems are likely to be resolved.

It’s for that reason that we have put the question of professional regulation at the heart of our recent Accountable campaign. In recent years Accountable has been the public face of our advocacy efforts, and it has proved pivotal in effecting better dialogue between AAT, its members and the wider community. The work can be hard at times, requiring patience, resilience and the ability to compromise. But make no mistake: it’s vital that the profession engages with these issues not only for its own benefit, but also for the general good of business, government and taxpayers.

We are keen to work collaboratively with HMRC to help drive through appropriate solutions. The evidence of the impact that successful collaboration can have is already there, with numerous examples of how a symbiotic relationship has delivered real benefits. For instance, our work on developing the professional conduct in relation to taxation (PCRT) framework and guidance. That guidance is embedded in the Code of Ethics for each of the seven PCRT bodies, and indeed HRMC’s own standard for agents has been developed to encompass core elements of the PCRT guidance.

The issue of unregulated accountants affects so much of the workings of the economy, from confidence in business to the effectiveness of government policy and the efficient functioning of HMRC, a body that has seen its resourcing cut to dangerous levels in recent years. Solving the conundrum will require compromise and realism on all sides. We can’t punish our way to a solution, nor can we allow professional standards to be compromised in the hope of progress. And – most important – we must not simply ignore the issue and hope it goes away.

So, as the Spring Statement rolls around, we hope that the spirit of collaboration persists. The past suggests it can deliver exceptional results.

Have you ever taken on clients who were previously using an unregulated tax agent?

If so, please fill out our feedback form so we can gather valuable evidence to take to the government in support of our Accountable campaign.

Fill out the form

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

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