HMRC Reinforces Standard For Agents

January 24, 20230

HMRC has strengthened its “standard for agents” by including stricter transparency rules and greater evidence of customer consent following a consultation on improving standards in the repayment agent sector.

The update to the standard for agents comes as the tax authority has introduced new transparency requirements for agents as a result of the Raising standards in the tax advice market consultation. The aim of the consultation was to crack down on repayment agents, but these steps to tackle this market will also apply to all tax agents.

Under the new requirements, agents will be required to be more transparent over agreements clients are entering into and to offer a period of at least 14 days in which a client can cancel any agreement.

Despite HMRC adding further expectations to the standard for agents document, the tax professional bodies have pushed for the standard to go further and for tax agents to be regulated to increase public confidence and ensure the consumer protection regulatory gap is met.

Stricter transparency

The new transparency requirements in the standard for agents highlights the need for firms to be clear in their marketing and communications. This includes making it clear that they are not acting on behalf of HMRC and that the identity of the agent or firm is clear.

Tackling another common repayment agents concern, the ‘standard for agents’ requires that clients understand before the terms of engagement how the agent is to be paid for their services and how any tax refunds will reach the client. This added layer of transparency is in response to the high volume agents that take a commission from a refund claim or have used a deed of assignment.

The standard for agents outlines the requirement for the terms of engagement to be “accurate and do not mislead or conceal material facts”. The paper used the example of using clear and prominent display of the agent’s fees or charging structure.

Another update that reinforces transparency is the expectation for agents to offer a 14-day cooling-off period for clients, so they can cancel any agreement or assignment they’ve entered into.

The standard for agents also expects agents to agree the terms of engagement in writing and provide details of how the client should contact them. The standard specifically highlighted social media accounts, a PO Box or an email account not linked to the agent – such as an info@ or contact@ firm email address) – as “not sufficient by itself”.

Clients should also be given on request the details of how they can complain about an agent and the details of how the client can complain to the agent’s professional body.

A step towards further regulation

The added layer of transparency and customer consent was broadly welcomed by the tax professional bodies, but both the Chartered Institute of Taxation (CIOT) and the Association of Taxation Technicians (ATT) highlighted that further steps are needed to regulate tax agents

Pointing out that the standard doesn’t require agents to have professional indemnity insurance or participate in continuing professional development, ATT’s Senga Prior said: “As long as activities relating to taxation can be undertaken by anyone who chooses to do so and can be undertaken without any kind of effective regulation, there will always be the opportunity for some engaged in those activities to do so with scant regard for customer protection.”

The chair of the ATT technical steering group acknowledged that the new standard will go some way in demonstrating the characteristics HMRC expects from an agent, but for it to be effective she said “HMRC needs the legislative power to enforce any non-compliance”.

CIOT’s John Cullinane added that the changes would be unlikely to affect members of professional bodies as they are already subject to professional conduct in relation to taxation (PCRT).

“The standard for agents already broadly reflects PCRT as regards revenue protection – now HMRC intends to introduce some consumer protection elements as well. But the standard still won’t go as far as PCRT on areas such as avoiding conflicts of interest and continuous professional development,” noted Cullinane.

However, the director of public policy for the CIOT raised questions over the enforcement of the standards if the agent doesn’t meet the requirements.

“It’s not clear that HMRC can ‘derecognise’ agents other than in a tiny handful of cases, nor is there any range of intermediate measures corresponding to what professional bodies do to help members comply with professional rules and begin to sanction them if they don’t.”

He concluded that the best way of meeting the consumer protection regulatory gap is for all advisers to be members of professional bodies and those who behave unacceptably are expelled from a professional body.

What is the standard for agents?

The standard for agents sets out HMRC’s expectations of tax agents and advisers in dealing with the tax authority. When agents fail to live up to the standards set, HMRC could suspend agent codes to limit agent access to online services for self assessment and corporation tax. In certain circumstances, HMRC can refuse to deal with tax agents.

The standard was updated to take on board recommendations from the raising standards in tax advice consultation which took steps to tackle the repayment agent market.

The need for new transparency requirements for agents was one of the conclusions in the ministerial forward of the consultation.

“Feedback suggests that some repayment agents are not transparent about their terms and conditions, resulting in customers not fully understanding or being made aware of what they are signing away, or even that they were dealing with a third party and not HMRC,” wrote Treasury minister Victoria Atkins.

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