HMRC has updated its guidance on new regulations to tackle dishonest conduct by tax agents, which came into effect on 1 April 2013 and which gives HMRC the power to launch investigations and issue civil penalties.
The rules, which were subject to extensive consultation, replace the former sections 20A and 99, TMA 1970 rules. The three main provisions are that HMRC can obtain documents in the possession of the tax agent; the introduction of a new penalty of between £5,000 and £50,000 for dishonest conduct; and the potential publication of the details of tax agents who have been penalised as part of the HMRC's 'naming and shaming' approach.
HMRC's guidance makes clear that its original proposals to handle what it describes as 'a small minority of tax agents who act dishonestly' have been amended following comments from the professional institutes and other parties.
The tax authorities will now need tribunal approval before gaining access to a tax agent's working papers in a process known as a 'file access notice', while there has been a change of wording from 'deliberate wrongdoing' on the part of the agent to 'dishonest conduct'.
HMRC has to show that the agent's dishonest conduct led to a loss of tax. The agent has a right of appeal to a tribunal both in respect of the proposed investigation and against any penalty which might be levied. The guidance states that 'key decisions must be authorised at a senior level'.
The updated guidance outlines the steps that HMRC can take, starting with a 'conduct notice' that sets out the evidence it has. Tax agents have 30 days in which to appeal against this notice to the specialist officer dealing with the investigation.
If there is no appeal, or it is unsuccessful, HMRC can then ask a tax agent or other parties for the working papers. If these are not provided voluntarily, then HMRC can seek permission from the tribunal to issue a file access notice. While agents cannot appeal against this, other parties can but only if they feel it is too time-consuming or too much of a burden to get the papers. There is an initial penalty of £300 and then up to £60 for each day for failure to comply with the notice.
When it comes to calculating the penalty for dishonest conduct, HMRC says it has flexibility over the charges and will take into account how much help a tax agent provides to the investigation and whether or not the disclosure was prompted. There is no right of appeal against being given a penalty, although agents can contest the amount. HMRC has the right to publish the details of any agent who pays a penalty of more than £5000 on the GOV.UK website for up to 12 months.
The guidance is available on the HMRC website HERE
