On 6 March 2024, the government opened a new consultation to understand the issues facing the tax advice sector, learn how best to raise standards in the industry, and explore the possibility of regulation.
There is currently no statutory regulation of the tax advice market in the UK, unlike most other developed countries, and almost anyone can provide tax advice and services without oversight. A minority of tax practitioners do not meet expected standards, providing substandard advice and services, with people placing undue trust in them.
The Financial Secretary to the Treasury, Nick Huddleston MP, states that the government's aim with this consultation is to work towards 'making our tax system fairer and simpler', recognising that a complicated system is allowing 'incompetent, unprofessional or unscrupulous' tax practitioners to do harm to taxpayers and public finances.
The consultation will run until 29 May 2024, and the government is inviting opinions from 'anyone who may receive or provide tax advice or offers services to third parties to assist compliance with HMRC requirements', including umbrella companies.
The consultation puts forward three suggested approaches that could strengthen the regulatory framework and help prevent malpractice in the tax sector:
1. Mandatory membership of a recognised professional body - the professional body(ies) would monitor, enforce and raise the standards for compliance for their membership and the sector as a whole, however, it is unclear what counts as a 'recognised' body.
2. Joint HMRC and industry enforcement - unaffiliated tax practitioners would be monitored by HMRC, whereas members of professional bodies would be subject to supervision by their accreditor. HMRC and professional bodies would work together to raise industry standards.
3. Regulation by a government body - a government body would enforce and raise market standards, while a new, or expanded, independent regulator would monitor practitioners.
The government favours the first approach, but recognises that each has its merits and challenges and is open to contrasting opinions.
The PCA looks forward to hearing the outcome of this consultation and urges umbrella companies to share their views.