New tax agent registration regime: wider than you may think

In accordance with clause 224 of the Finance Bill, a ‘tax adviser’, for the purposes of the registration requirement, is an organisation or individual that, in the course of a business, assists other persons with their tax affairs. ‘Assisting’ another person with their tax affairs involves the following activities:

• Advising the other person in relation to tax;
• Acting or purporting to act as an agent on behalf of the other person in relation to tax; or
• Providing assistance with any document that is likely to be relied on by HMRC to determine the other person’s tax position.

Clause 223 sets out a general prohibition against unregistered tax advisers ‘interacting’ with HMRC. A person ‘interacts’ with HMRC if they do, or attempt to do, any of the following:

• Contact HMRC by telephone, post or email;
• Send a message to HMRC through a website or internet portal;
• File a return, claim, notice or other document with HMRC (whether electronically or otherwise); or
• Communicate with HMRC in any other way.
  

This prohibition is disapplied in certain cases which are set out in Schedule 20 of the Finance Bill. These include cases where the adviser interacts with HMRC in relation to a client who is a group undertaking in relation to the adviser. Here, ‘group undertaking’ is defined in accordance with s1161(5) of the Companies Act 2006: a parent, subsidiary or sister undertaking of that undertaking. Whilst this provides some relief for in-house groups the exemption does not extend to non-group entities such as joint venture or portfolio entities, bankruptcy remote entities and fund vehicles.

Other exceptions to the clause 223 prohibition include where the adviser interacts with HMRC:

• In relation to the provision of payroll or other tax or accounting software to a client;
• In relation to customs duty or import VAT;
• In their capacity as a VAT, NI tax or UK representative; or
• In relation to an appeal to a court or tribunal, or in response to a request for information from HMRC.

Definition of 'relevant individual'

Despite registration taking place at firm level (unless the tax adviser is a sole trader), tax advisers which are organisations must provide the names of all ‘relevant individuals’. These are individuals who work for the organisation and play a significant role in either:

• The making of decisions about how the whole or a substantial part of the tax adviser activities of the organisation are to be managed or organised; or
• The actual managing or organising of the whole or a substantial part of those activities.

Organisations with six or more officers in total but fewer than five officers carrying out either of the above roles will need to nominate other officers as relevant individuals to bring the total number of relevant individuals to at least five. Each officer of an organisation with fewer than six officers in total will be considered a relevant individual, regardless of their role.

The definition of ‘officer’ includes a director of a company and a partner in a partnership.

Tax advisers and relevant individuals of an organisation must meet the following conditions for registration:

• Have no outstanding tax returns or payments;
• Not be subject to a decision by HMRC to refuse to deal with them, or to a relevant anti-avoidance measure;
• Have no relevant anti-avoidance penalty imposed on them in the previous 12 months;
• Not be subject to a relevant suspension or ineligibility order;
• Not be disqualified as a director in the UK or overseas;
• Not have an insolvency practitioner acting in relation to them; and
• Have no unspent convictions for certain tax-related offences.

Tax advisers must also be Anti-Money Laundering (AML) registered and have a system for monitoring the ongoing compliance required under the regime.

In addition to the names of all relevant individuals, tax advisers must also include in their application their name and address and a statement that they have met the registration conditions (or explain why they have not been met), along with any other information or evidence required by HMRC to be set out by notice.

An unregistered tax adviser will contravene the general prohibition in clause 223 if they interact with HMRC on behalf of another person (and none of the relevant exceptions apply). In this case, HMRC may issue a ‘compliance notice’ to the adviser. The compliance notice may subsequently be withdrawn if the tax adviser becomes registered; however, if the tax adviser interacts with HMRC whilst subject to a compliance notice, HMRC may issue the tax adviser with a £5,000 penalty – raised to £10,000 where the tax adviser has incurred a financial penalty for prohibited interactions with HMRC on at least four prior occasions within the previous two years.

Alternatively, these same financial penalties may be issued against relevant individuals where HMRC consider that the prohibited interaction with HMRC was attributable to them (and any previous prohibited interactions, where relevant).

Further repeat offences of tax advisers or relevant individuals may lead to the issuing of a temporary or permanent ineligibility order, preventing tax advisers from registering and preventing individuals from being appointed as a relevant individual. Tax advisers issued with an ineligibility order must take reasonable steps to notify their clients within 30 days.

HMRC will be able to suspend a tax adviser’s registration if they consider that the adviser fails to meet the registration conditions, or that the adviser has behaved in a manner below the standards reasonably expected of a tax adviser in their interactions with HMRC. In the latter case, registration may be suspended for up to 12 months, whilst it may be suspended indefinitely for the former until such time as the registration conditions are met.

The relevant standards for behaviour will be confirmed by way of HMRC notice but are expected to refer to HMRC’s standard for agents.

As is the case for ineligibility orders, tax advisers suspended from registration must notify clients of their suspension.

The Exchequer Secretary has sought to alleviate concerns regarding how strictly the suspension power will be applied, by stating that this will only be “after due process” and would not be used for a “minor” breach of the rules. Tax advisers (and relevant individuals, where appropriate) will be able to appeal a suspension order, or the issuing of a compliance notice or ineligibility order. However, unless one of the ‘temporary relief’ provisions applies, the suspension order will not be put on hold until an appeal has concluded – which could have significant implications for a tax adviser’s business.

Given the wide range of circumstances in which a professional may interact with HMRC on behalf of a client, the new registration requirement will doubtlessly encompass organisations and individuals which may not traditionally be perceived as ‘tax advisers’ – including accountants, payroll specialists, conveyancers and trust and estate practitioners.

As outlined above, the registration requirement will also encompass in-house tax teams acting on behalf of a company which is not part of the same corporate group – whether that be a joint venture, consortia or bankruptcy remote company, for example. This could cause teams erroneously believing that they can rely on the ‘group undertaking’ exemption to fall foul of the rules.

As currently drafted, there are also many potential instances in which providers of financial services could be caught by the registration requirement: for example, in theory, a UK fund manager would be required to register as a tax adviser before requesting a UTR for a new fund vehicle, even if it is only necessary in order to complete a Form 64-8 and appoint an external tax agent to manage the fund vehicle’s tax affairs.

It will be key for potentially affected organisations and individuals to pay close attention to their activities which involve helping another party with their tax affairs. Any activities involving contact with HMRC on their behalf should be identified, as these will trigger a registration requirement. Whilst the ‘group undertaking’ exception may apply in certain in-house cases, it is tightly ringfenced and its application should not be assumed, particularly in fund situations. A group structure review should be considered where appropriate.

Registration should not be viewed as a single event. As HMRC will be able to request evidence of ongoing compliance with the registration conditions, registered tax advisers should ensure that robust control mechanisms are maintained. Relevant individuals should be identified and screened for any potential breaches of the registration conditions – both at the time of registration and on a regular basis afterwards.

Once the relevant behavioural standards to be met are confirmed by HMRC, training refreshers for individuals undertaking tax activities should be considered. Equally, advisers may determine that they are not required to register if interactions with HMRC can be avoided. However, clear practice guidelines should be communicated to teams to ensure that no prohibited interactions occur and ongoing monitoring of adherence might be needed.

Timelines for registration will be set by HMRC, with the expectation that registration will open in May and there will be at least a three-month period for registration to take place. The deadline for registration will vary depending on the types of services the tax adviser provides. A pause on registration until 2027 is expected for financial services companies but is not expected to extend to other sectors.

Tax advisers within scope of the registration requirement should identify the relevant deadline and keep up to date with any further developments and HMRC guidance as it is released, including the latest tranche released in February: ‘Check if you meet HMRC’s conditions to register as a tax adviser’ and ‘Check if and when you need to register as a tax adviser with HMRC’.

For further information please contact:

• David Wren
• Catherine Anderson