A tax expert has warned of ‘costly errors’
A tax expert is alerting people to a new HMRC rule that could catch people out. Conveyancing solicitors and payroll teams are among local professional advisers who may find themselves on the wrong side of the law from May – with penalties of up to £10,000 for compliance breaches. They must, under the wide definition of ‘tax adviser’, mandatorily register with HMRC by then if they interact or submit documents to the HMRC on behalf of clients.
“There are going to be some costly errors made by unsuspecting organisations or individual sole traders who assist other people with their tax affairs,” warned Rick Schofield, a tax partner at Azets, an accountancy and business advisory firm. “This compliance shake-up is going to catch a lot of people out, the good as well as the bad, such as when it comes to stamp duty returns or chasing a PAYE code.”
The scheme replaces a voluntary registration system.
Rick, who specialises in advising on personal and company taxation matters, said: “The new regulations will affect all tax advisers who interact with HMRC on behalf of their clients – and tax advisers are those who provide professional tax advice and services, such as a conveyancing solicitor, but might not necessarily fall into the sole remit of accountants. Payroll teams are not exempt either – you must register even if it is an email or portal enquiry to chase a PAYE code for a member of staff.”
Rick, who is based in Kent, said that advisers within professional partnerships were in the dark about whether the firm or the individual would be on the hook for breaches.
He said: “Perhaps, to be on the safe side, partnerships may decide that it would be somewhat prudential for each partner to register with HMRC, even if they don’t submit the paperwork to HMRC in the normal course of their duties. It has been mooted by the accountancy profession, to Parliament, that the registration places unfair burdens on smaller tax adviser firms when compared to larger ones.
“Of course, everyone is looking to HMRC for an exhaustive dos and don’ts list, but nothing is forthcoming yet, adding to a sense of filing doom from May. People just want clarity and guidance.”
According to HMRC, the policy “ensures all tax advisers interacting with HMRC on behalf of their clients meet minimum standards”; that the changes “will improve HMRC’s ability to monitor and exclude tax advisers who are objectively unable to meet HMRC’s Standards for Agents or cannot lawfully act as a tax adviser”.
A digital registration process will be available, with a non-digital alternative for those who are digitally excluded; HMRC states that it is investing £36m to modernise existing registration services. The process starts in May, with a transitional period of at least three months for all tax adviser groups; there are no registration fees.
In a policy paper published last November, HMRC stated that individual taxpayers will not be directly affected by the requirement for their tax advisers, whether UK-based or overseas, to register with HMRC before they can act on their behalf.
Rick said: “However, individual taxpayers may be affected if their tax advisers are no longer able to act on their behalf because they are either unable to satisfy the new registration requirements imposed on (UK-based and overseas) tax advisers, or if their tax adviser is subject to sanction.
“You may see individual taxpayers left in expensive limbo, and facing late penalty fines, if their agents decline to send documentation to HMRC for whatever reason.”
Penalties range from £5,000 to £10,000. Payroll teams at companies are already under pressure with the government’s April 6 introduction of holiday pay compliance – the new Fair Work Agency can impose hefty fines or open criminal investigations for worker exploitation if paperwork is incorrect and staff are underpaid.
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