HMRC's Mandatory Tax Adviser Registration Begins Next Month with Fines Up to £10,000
A significant change in HMRC tax rules is set to take effect next month, with a tax expert warning that it could lead to costly errors for unsuspecting organisations and individuals. The new regulation mandates that all tax advisers must register with HMRC, replacing a previous voluntary system, and non-compliance could result in penalties ranging from £5,000 to £10,000.
Who is Affected by the New Rule?
The rule broadly defines tax advisers to include professionals such as conveyancing solicitors and payroll teams who interact with HMRC on behalf of clients. According to Rick Schofield, a tax partner at Azets, an accountancy and business advisory firm, this change will impact a wide range of advisors, not just accountants.
Schofield cautioned, "There are going to be some costly errors made by unsuspecting organisations or individual sole traders who assist other people with their tax affairs." He added that the compliance shake-up will catch many people off guard, including those handling stamp duty returns or chasing PAYE codes.
Registration Requirements and Challenges
Under the new regulations, tax advisers must register with HMRC if they submit documents or make enquiries on behalf of customers. This includes even simple actions like sending an email or using a portal to chase a PAYE code for staff. A digital registration process will be available, with a non-digital alternative for those who are digitally excluded, as part of a £36 million investment to modernise services.
However, Schofield highlighted ongoing uncertainties, particularly for professional partnerships. "Perhaps, to be on the safe side, partnerships may decide that it would be somewhat prudential for each partner to register with HMRC," he said. There are also concerns that the registration places unfair burdens on smaller firms compared to larger ones, a point raised by the accountancy profession to Parliament.
Impact on Taxpayers and Transition Period
HMRC states that the policy aims to ensure all tax advisers meet minimum standards and improve the agency's ability to monitor and exclude those who cannot meet its Standards for Agents. While individual taxpayers are not directly required to register, they may be affected if their advisers fail to comply.
Schofield explained, "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 or if their tax adviser is subject to sanction." This could leave taxpayers in expensive limbo, facing late penalty fines if their agents decline to send documentation.
Timeline and Additional Pressures
The registration process begins next month, with a transitional period of at least three months for all tax adviser groups. There are no registration fees, but the change comes amid other compliance pressures, such as the government's recent introduction of holiday pay compliance rules, which can lead to hefty fines for payroll errors.
As the deadline approaches, many are seeking clarity from HMRC. Schofield noted, "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."
