New powers to deal with dishonest agents will be cheaper for HMRC, says Stanley Dencher

There are powers under the criminal law that HMRC can use to deal with dishonest agents who are a ‘centre of infection’, but in practice such powers are often too costly and time-consuming.

From 1 April 2013, HMRC has significant powers under the Finance Act 2012, Schedule 38 to deal with dishonest conduct by tax agents.

The main powers are: to penalise concealment and dishonest conduct; and to require relevant documents, such as the working papers of certain tax agents, to be provided to HMRC.

A ‘tax agent’ is defined as an individual who, in the course of business, assists clients with their tax affairs. Because a tax agent must be an individual, the definition applies to an employee of a firm, but not to the firm itself.

An individual engages in dishonest conduct if, in the course of acting as a tax agent, the individual does something dishonest with a view to bringing about a loss of tax revenue.

If HMRC determines that an individual is engaging in or has engaged in dishonest conduct, an authorised officer of HMRC may send a conduct notice to the individual of that determination. The conduct notice must state the grounds on which the determination was made.

Once a conduct notice is in force, HMRC may issue a file access notice to require the provision of particular relevant documents specified in the notice.

A file access notice may require documents to be provided: (a) within such period, (b) by such means and in such form, and (c) to such person and at such place, as is reasonably specified in the notice or in a document referred to in the notice.

Agents need to be aware at least in general terms of what HMRC could require them to do and the consequences for failing to comply.

Stanley Dencher, tax writer, CCH Online