Raising standards in the tax advice market

[Image by Peter Timmerhues from Pixabay]

We are responding to another consultation today - this time it is to do with raising standards in the tax advice market. The policy under consultation is a deeply disappointing follow-up to a consultation which was run on the same topic last year. We were delighted to learn at that stage that the government was taking seriously the deep structural problems which plague the tax advice market to the detriment of all of us, and we could not have been more disappointed by the weakness of the policy proposal that emerged: a requirement for tax advisers to carry professional indemnity insurance.

This requirement will be of negligible effect vis-à-vis the dominant forms of abuse that take place within the tax advice market. Many of the advisers implicated in some of the most abusive ineffective schemes to come before the courts are regulated professionals who already have professional indemnity insurance. Sometimes highly abusive schemes are promoted by the ‘big four’ accounting firms that dominate the industry. Often, even the schemes promoted by unregulated promoters without insurance are supported by false legal opinions from high-status insured professionals i.e. QCs.

The tax industry is unusual in that the tax system incentivises people to seek out and pay for bad advice. This is because bad advice, insofar as it is to the effect that a tax saving is available even where it is not, enables taxpayers to report reduced tax liabilities. And owing to HMRC’s resource constraints there is a reasonable chance those tax savings will be obtained even though they are not lawfully available. The business model of the entirety of the aggressive end of the tax advice market is fundamentally one of criminal tax fraud, papered over with a superficial appearance of professionalism. A requirement to carry insurance will do nothing to change this.