Enhancing HMRC's ability to tackle tax advisers facilitating non-compliance

The consultation asks for views on:

• expanding information powers against tax advisers
• introducing stronger penalties against tax advisers who contribute to the tax gap
• publishing details of tax advisers subject to HMRC sanctions
• sharing a greater range of information about tax advisers with their professional bodies

While we have not answered the specific consultation questions, as tax professionals and as representatives of lower paid taxpayers as well as strong advocates of the importance of trust in the tax system, LITRG have taken the opportunity to make a few broader points including:

We have previously highlighted that HMRC were slow to react to increasing numbers of unscrupulous repayment agents over the last few years. It is very positive and reassuring that a great deal of work is now underway in this space however it is vital that HMRC do not now swing too far in the opposite direction. There is a wide spectrum of operators – including some, that although they may create additional demand on HMRC resources, are meeting a genuine need in the marketplace. It would be regrettable if HMRC are now on a path where they make life so difficult for some repayment agents that they cease to trade. This would significantly reduce the options for taxpayers, and would mean that some taxpayers are no longer in a position to obtain tax refunds to which they are entitled.

Where agents make unfounded claims there is a tax loss, which we understand HMRC may try and claw back from taxpayers. While the consultation document states that taxpayers are responsible for their own tax affairs, in many cases, we think this is an oversimplification and when HMRC demand a tax payment from taxpayers in situations like these, it damages the taxpayer; it also damages their opinion of and trust in tax, HMRC, the tax system, and the government. We think that it may be time for HMRC to consider their approach to taxpayers affected by unscrupulous tax repayment agents. In the meantime it seems to us that there is considerable scope for HMRC to interpret the Electronic Communications Regulations in a way that is helpful to taxpayers who are used as the conduit for attacks on the system. In any case, we would like HMRC to state their compliance approach to provide as much consistency and certainty as possible.

The CIOT is submitting a separate full response with insights from those closer to the agent population.