HMRC’s Agent Compliance Teamseeks to maintain honesty and integrity at the heart of the accountancy profession.
What is Agent Compliance Team (ACT)?
As a part of HMRC’s strategy for businesses and agents, the HMRC Agent Compliance Team was set up in 2012, to assist and identify risks posed by agents. Its main focus is on:
working with compliant agents
enabling agents to align with HMRC’s compliance strategy
maximise ‘upstream’ compliance
penalising non-compliant agents
reducing the tax gap.
Part 3 of Schedule 38 of Finance Act 2012 confers the powers to acquire the tax agents’ working files in specific circumstances with the approval of a tribunal.
Who is a tax agent?
The definition of a tax agent is quite wide as per the legislation.
A ‘tax agent’ is an individual who, in the course of business, assists other persons (‘clients’) with their tax affairs, directly or indirectly. It may include:
sole accounting practitioner
partner or employee of an accounting practice, however the practice is constituted
tax advisor and tax consultant
employee of a bank where that person provides tax advice
solicitor giving advice on tax matters
valuer providing valuations for tax purposes.
Tax agents can be qualified members of a professional body or unqualified accountants.
Who are dishonest tax agents and what is dishonest conduct?
There is no definition of ‘dishonesty’ in Schedule 38 of Finance Act 2012; however it follows the normal dictionary meaning and what the tax law says. It is the intention of the adviser that outlines whether they have been dishonest in their dealings or not.
Dishonest conduct means a tax agent has done/not done something with a view to cause a loss of tax revenue while assisting or advising a client.
What sort of common errors and risks have been identified by ACT?
As an example, HMRC ACT has indicated the following fundamental common errors and risks they found from agents interventions for CIS subcontractor clients:
artificial inflation of CIS refunds by inflating deductions
claiming expenses which have already been reimbursed by the main contractor
no details of mileage log maintained or claiming home to work travel or claiming actual motoring expenses along with mileage
a standard claim for subsistence and travel without any records or expenses details
uninformed and unjustifiable claims for use of home as office
no consideration to private element of mobile phones cost for its usage
claiming a wife’s wages without any description of her role or PAYE scheme. Usually this is set on a non-commercial basis and no record of payments is kept.
Businesses are able to claim business expenses if they are incurred ‘wholly and exclusively’ for the business. HMRC has produced guidance for self-employed businesses about what expenses they are able to claim.
How does ACT operate?
HMRC agent engagements seek to test and challenge the agents’ understanding of their obligations to their clients, profession and HMRC. They seek to engage with those agents whose client base or tax returns submitted present a risk to HMRC and their clients. They meet agents to check:
their pre-return processes
their knowledge of and practical understanding of the taxes acts
the overall aim is to work with the agent, providing education and encouragement enabling them to improve going forward.
What are the penalties for dishonesty?
An individual who engages in dishonest conduct is liable to a penalty from £5,000 to £50,000. In assessing the amount of the penalty, regard must be given to:
whether the individual disclosed the dishonest conduct
whether that disclosure was prompted or unprompted
the quality of that disclosure
the quality of the individual’s compliance with any files access notice in connection with the dishonest conduct.