HMRC consultation on raising standards in the tax advice market – Law Society response
HM Revenue and Customs (HMRC) sought opinions on raising standards in the tax advice market, including the possibility of requiring all providers of tax advice to carry professional indemnity insurance (PII).
These changes are intended to:
- improve standards for professional tax advisers
- provide consumers with greater protections
- boost confidence in tax advice
We support HMRC’s intentions and believe that, properly implemented, a requirement for all tax advisers to carry a minimum level of cover should achieve their objectives.
However, there are already large numbers of tax advisers who are members of regulated professions, including solicitors, who are already subject to minimum requirements for PII and many additional checks on their activities.
We’re concerned to make sure that if HMRC does bring in mandatory PII, the new regime will not create any additional burdens on regulated professionals whose existing obligations meet or exceed the new requirements.
What this means for solicitors
If the proposals are implemented and do not apply to tax advisers who are members of regulated professions that are already subject to mandatory minimum levels of PII, then there should be no direct impact on the great majority of solicitors.
Assuming HMRC sets appropriately stringent minimum terms and conditions (MTCs) for tax advisers who are not already under a regulatory obligation to carry PII, the indirect oversight of underwriters should lead to improvements in the provision of tax advice to consumers.
With properly calibrated MTCs, prudent insurers will only extend cover to those tax advisers who represent a good risk.
Those providing services with uninsurable risk (whether in terms of demonstrable low quality or the type of service such as aggressive tax planning) will effectively be driven from the market.
This will satisfy HMRC’s policy aims of improving trust in the tax advice market, by targeting poor behaviour and allowing taxpayers greater redress when things go wrong.
It’s possible that freelance solicitors who offer tax advice but no reserved legal activities – and are therefore not subject to the Solicitors Regulation Authority’s PII requirements – will be drawn into the new HMRC regime. However, we see this as proportionate, given the risk to consumers.
The consultation closed on 15 June.
We will remain engaged with HMRC on this issue and have offered to assist it in the development of its minimum terms and conditions.