About Chartered Accountants Ireland

Chartered Accountants Ireland is the largest and longest established accountancy body in Ireland. It has over 20,000 members and 5,000 students, and it is the leading voice of the accountancy profession in Ireland.

Chartered Accountants Ireland was established by Royal Charter in 1888. Its activities and those of its members are governed by its Bye-Laws and by Rules relating to professional and ethical conduct. These provisions are contained in the Handbook which is available to all members.

Chartered Accountants Ireland is governed by a Council and it is responsible for determining policy and monitoring its implementation. Council is led by the Officer Group and supported by the Management Team and staff. A number of commit-tees with voluntary member involvement also play a key role.

Introduction

1. Chartered Accountants Ireland believes this consultation to be one of the most important for the Agent community in a number of years.
2. We have informed our members of the proposals through a number of means including pieces in our bi-weekly news bulletins, a workshop held by Brian Redford and Lesley Agnew on 23rd June 2011 and an article contributed by Brian Redford to the August edition of Accountancy Ireland. Accountancy Ireland has a circulation in excess of 25,000 professionals. Against this background of professional engagement, we welcome the proposed distinction between “professionally qualified” agents and others.
3. The response herein has been formulated from feedback and responses received directly from members in addition to input from the Northern Ireland Tax Committee of Chartered Accountants Ireland.

Specific proposals of the consultation document

1. The provision of a self-serve facility for tax agents:

a. Enrolment

• Currently HMRC requires limited information when registering an agent;
• Proposal is for all tax agents to enrol on a new HMRC agent database, whether they are paid or not;
• This will be required whether or not the Agent then choses to adopt self-serve (optional).

Potential issues and observations

1. How will agents be identified in the HMRC database? Currently gateway logins are for firms and for larger firms offices/regions within firms so perhaps this approach will continue however there may need to be a level of ‘granularity’ to identification within the database. There is a need for firms with offices in separate geographic locations to register each office separately.
2. The enrolment for self-serve online should include both paid and unpaid/informal agents with the same level of information required for each Agent irrespective of status. However the enrolment process should not act in such a way to deter unpaid agents who are often professionals and members of professional bodies providing a valuable service and access to tax expertise to many taxpayers who would otherwise not be able to afford this assistance. It is difficult however to envisage an enrolment process which would be too daunting for any competent professional, be they registered or otherwise.
3. As part of the enrolment process the consultation document sets out the potential data set of information to be provided at initial enrolment. We do not see any issue with providing the information set out on page 21. It is not unreasonable to ask an agent to confirm ‘that they have met their relevant tax obligations to file returns and meet liabilities’ but it must be determined whether this confirmation is to apply to the agent perhaps as a limited company, or as a partnership. The situation is perfectly clear for sole practitioners, but the more important registrations are unlikely to be carried out by sole practitioners. We also need to be clear for what purpose would this information be provided?
4. We would recommend that initially enrolment take place over a 3 month window in a quieter period for Agents, say from June – August. The consultation document moots either annual updating of enrolment or only updating enrolment on the basis of a change. We believe an annual re-enrolment would not be burdensome if it occurred within the June – August time window however there should be a mechanism to update enrolment during the period as a result of changes. For Agents where there has been no change during the period annual re-enrolment should be on the premise of a simple confirmation ‘there have been no changes’.
5. Any Agent wishing to access self-serve online should be required to enrol regardless of whether they are a new agent business or are seeking to act for a new client. However initially it may be necessary to assist the flow of enrolments to introduce access to self-serve on a phased incremental basis but we would suggest that it is initially made available to existing agent businesses wishing to use the self-serve function.
6. We feel it will be important to establish a service level agreement whereby, upon enrolment, an agent is clear as to the time interval before the enrolment is accepted and before they are recog-nised as acting for clients. Similarly, the system should distinguish between enrolment processes whereby the agent is identifying themselves and updating their own details, as distinct from merely registering that they are acting or have ceased to act for an individual taxpayer. Different service level agreements are appropriate for the different tasks.

b. Online options

• HMRC is proposing to develop new online services that will enable paid agents to self-serve certain transactions themselves.
• Potential online services to be offered are listed on page 23.
• Self-serve will be voluntary – agents will still be able to contact and work with HMRC through existing channels.

Potential issues and observations

1. This project offers tremendous potential to develop and improve HMRC's service standards. Over the next four years HMRC are facing further cuts in resourcing as part of the Comprehensive Spending Review. This comes after cuts already initiated as part of HMRC's Change Programme. Given this budgetary context we agree that HMRC does need to look at more radical ways of improving efficiency – self-serve provides that opportunity if properly designed, trialled, implemented and serviced by HMRC. However HMRC's service standards, will need to be constantly reviewed and improved as self-serve is rolled out. The project will benefit from having recourse to the lessons learnt from the Carter project.
2. The ability for enrolled agents to self-serve some functions currently undertaken by HMRC is welcomed as a natural extension of the development of electronic services. We do not believe that this alters the agent/client relation-ship, particularly when errors are made. Self-serve is simply a different way of completing client work. However it will be very important that an agent is able to demonstrate to a client the work that has been undertaken on their behalf. The self-serve facility should enable a listing of transactions effected to be accessed by the agent with an ability to generate historical data from archive where necessary.
3. The consultation document asks for details of other potential transactions agents believe should be included. We agree that it is worthwhile considering other services at the outset however piloting self-serve initially makes sense to bed the system down. As part of that bedding down we would suggest initially start self-serve with the range of services on page 23 of the consultation document building up to the full suite once initial progress has been assessed and any problem areas addressed.
4. Looking at the options for implementation on page 23 we would classify these 6 as most appropriate to include initially as part of the pilot scheme. Future enhancements should be introduced as a result of specific feedback and requests from agents and it may be appropriate to consider further consultation for such enhancements.
5. The Irish ‘Revenue Online System’ (ROS) provides a very wide ranging interactive e-enabled ‘customer’ and ‘agent’ service, including a facility to claim some allowances and reliefs by SMS. We suggest that the services offered by self-serve online are reviewed in comparison to those available under ROS when considering adding to self-serve services in the future. There may also be merit in examining what self-serve facilities other Revenue Authorities offer.
6. A well-designed robust and properly implemented self-serve facility would provide agents with the opportunity to take control over data input and by deduction should help to reduce errors and cut costs for both the Agent and HMRC.
7. Self-serve must be designed to be ‘Agent-friendly’ and easy to use (time spent should be no more than processing is under the current system).
8. We believe that Agents who are members of professional bodies should be granted access to a form of ‘fast-track’ self-serve once the initial trialling of self-serve online has been completed. A type of ‘emergency access’ option should also be considered where an Agent is approached by a new client close to the filing deadline with any information submitted or changes made via the on-line function held in suspense until confirmation of appointment is obtained from the taxpayer.
9. The Chartered Accountants Regulatory Board (CARB) is responsible for developing Standards of Professional Conduct and supervising the compliance of members, member firms, affiliates and students of Chartered Accountants Ireland. Our members, member firms, affiliates and students are subject to strict regulation and monitoring and as such we would expect any ‘fast-track’ self-serve option to be made available from the outset to those who meet those high standards. More information on the rules and regulations expected and enforced by CARB is available at www.carb.ie.
10. Mandatory self-serve would not be welcome at this point in time and if it is envisaged that it will become mandatory this will have to be carefully handled and subject to further consultation.
11. Accessing self-serve will be dependent upon the requirement that the agent meets certain minimum levels of IT security (to be decided upon in consultation with the professional bodies) if agents are to be allowed access to HMRC's systems to input data and make amendments.
12. HMRC too will need to ensure high levels of security on the secure gateway to prevent fraudulent attacks on the system so this aspect will also be critical for Agent and thus client confidence.
13. A critical aspect of this will be to follow the recommendations and best practice guidelines of the OECD Forum on Tax Administration (FTA) who in March 2010 published the ‘Framework for the Provision of Electronic Services to Taxpayers’. One of the key considerations outlined in the framework is that such a system ‘requires a robust security strategy (which meets legislative requirements) to maintain confidentiality, integrity and availability of data and systems’.
14. Within the framework the FTA recommends that security strategy should address authentication, authorisation and non-repudiation in addition to areas such as disaster recovery and business continuity. Authentication is defined as verification of user identity (how a system knows the user is who they say they are which can be password-based, device-based or biometric) whilst authorisation is defined as what a user can do (may be used on user profile, set permissions etc). Non-repudiation is couched in terms of the ability to prove that a transaction originated from a specific person which commonly involves use of digital certificate/signature.
15. The IT security issues arising present a mutuality of responsibility and obligation for both the enrolled Agent and HMRC and this aspect must clearly be recognised and agreed to by both parties to the relationship.
16. We recommend an early decision as to the extent to which self-serve facilities will be provided by third party software developers, or enabled through direct access to HMRC web services.

2. Understanding an agent's engagement with HMRC

a. Developing an ‘agent view’

• HMRC intention is to build an Agent view – i.e. a more consistent and coherent picture of each agent to include monitoring performance of agents and their clients.

Potential issues and observations

1. HMRC has requested views on what factors should be taken into account in developing the agent view. The professional standard or benchmark should be set in conjunction with the professional bodies.
2. An agent working primarily on enquiry cases should not be classified as higher risk than those working solely on compliance. Likewise an Agent primarily engaged in tax planning advice should not automatically be ‘marked down’. In fact we would suggest that involvement in enquiry or investigation cases should not be factored in at all when arriving at the agent view.
3. ‘Agent view’ should be developed in the ‘in the round’ with all relevant factors taken into account
4. What use will be made by HMRC of the infor-mation from the Agent view? The consultation envisages information will provide HMRC with the ability to ‘categorise’ Agent performance – but taking this a stage further what then happens?
5. Will Agents be issued with the categorisation of their firm? Will sanctions be implemented for Agents falling below standards and if so when will sanctions be imposed, what will those sanctions be? Agents need to be provided with the right to challenge ‘categorisation’. Categorisation challenges should be held in camera.
6. It is likely to take many years before HMRC gather sufficient data on agent performance to be able to use this information effectively. The standard should be set in consultation with professional bodies with visibility for Agents at the outset of the standard expected to be met.
7. HMRC proposes to include as part of the ‘agent view’ the compliance performance of the tax agent's clients. This is a concern if not properly handled. Whilst it is confirmed that developing an ‘agent view’ will take many years and HMRC will be looking at all factors in assessing performance in recognition that ‘a one size does not fit all’, it is commendable that HMRC recognise fears that poor performing clients may jeopardise the agent's ability to self-serve and do not intend to use ‘compliance’ as a determining factor in the Agent view.
8. As a professional body committed to maintaining and improving standards and promoting life-long learning, Chartered Accountants Ireland believes that professionally-qualified tax agents should receive proper credit for doing good work and that appropriate action should be taken to improve the standards of agents who are performing poorly.
9. As an overall point we do however find it surprising HMRC does not already have access to information about agent performance as part of its existing risk management procedures. This is particularly surprising not least in the context of this consultation but also in the context of the ongoing consultation aimed at targeting dishonest tax agents. If HMRC are certain there is a case for legislation aimed at dishonest tax agents then this must be founded on evidence. We are told this legislation is based on an evidential need, yet as part of this consultation we are told that HMRC do not have access to this information.
10. Appropriate safeguards to enable an agent to challenge HMRC's views will very much be dependent upon the potential sanctions HMRC are likely to impose as a result of their being deemed to fall below the ‘minimum standard.’ We cannot comment on safeguards unless we have specific knowledge of these potential sanctions.
11. It follows that a less onerous standard of qualification will usually result in a reduced ability to transact with HMRC. We believe a relevant qualification to gain access to self-serve options should have a significant element of tax law and practice on its curriculum, as for example does the Chartered Accountancy qualification.
12. The period of time for qualification is dependent upon many factors with differing experience and exam regulations for each professional body. It is difficult to be prescriptive in setting a time limit to attain a qualification.
13. Other than HMRC refusing to deal with agents, which should only happen in the most extreme of situations and after due process has been served; sanctions for falling below the set standard will be dependent upon the factors in each case. These could range from simply targeted education of the agent to more serious sanctions for example those of enhanced monitoring and filing implemented on taxpayers falling into the Managing Deliberate Defaulters programme.

b. Recognition of professional qualification

1. The proposals in the paper would not distinguish between professionally qualified agents who are members of a professional body and others who are not so qualified. We believe that any proposals should provide proper recognition and credit for the role played by professionally qualified tax agents such as members of Chartered Accountants Ireland.
2. Membership provides an important recognition of quality across a number of areas including detailed technical knowledge, the need for Continuing Professional Development and Lifelong Learning, adherence to codes of practice and ethical standards and acceptance of monitoring.
3. While non-affiliated agents may meet some of these criteria, there is no guarantee that they will and in fact do so, nor are they subject to sanctions etc if they do not. HMRC's view appears to be that the only criteria that matter are honesty and competence, and that the agent view will enable the creation of an objective picture of each enrolled agent's performance. Human rights concerns have been cited as preventing any differentiation in approach other than on objective grounds. Why then do so many thousands of people choose to train and qualify with a professional body if this makes no difference to the standard of their work with UK taxpayers?
4. The market has already determined that the best services are provided by firms of Chartered Accountants. While HMRC must treat taxpayers as equal unless there are clear indications to the contrary, that equality of treatment does not extend to agents. Put simply, some agent firms are far superior to others.

c. Future regulation of the tax profession

1. Future regulation of the tax profession is discussed in the final part of the paper.
2. We do not see a role for HMRC in the regulation of the tax profession.

d. Refusing to deal with a tax agent

1. This is a very important area given the recent Christopher Lunn case and the Tribunal decision that HMRC's action in such extreme cases need to be ‘necessary, relevant and proportionate’.
2. It is our understanding that HMRC intends to publish procedural guidance on this so that the process is understood and rights to representation are clear. We would welcome this and reiterate the need for the involvement of an independent panel in these most serious of cases.

3. Taxes Impact Assessment

These responses address the specific questions posed on page 35 of the consultation document.

a. What changes do you expect to make as a result of the proposals in this consultation document?

1. Changes may be required in the area of client acceptance, record keeping and security. Member firms will typically have rigorous systems in place already for prospective client checking and ongoing case management, in part associated with compliance under the anti-money-laundering legislation. Some of the required changes therefore will be more in the modification and tailoring of existing good practice, rather than devising new processes and procedures for handling client work.
2. Investment may also be required in terms of available computer technology, security protocols and procedures, and staff training. Some additional client liaison, which in many instances cannot be charged for, will be needed to explain revised processes and service practice to clients.

b. Do you have any views on the potential ‘one-off’ costs involved in making the changes?

1. We recognise that for the proposed initiatives to succeed, a certain level of investment will be required. In the majority of cases, professional practices charge for their services by reference to time. In that context, the availability of a stable and comprehensive self-serve platform which will render efficiencies in the processing of routine tax work should justify investment in capital equipment and training within a commercially acceptable timeframe.
2. We would urge that any self-serve infrastructure to be provided would not require specialist communications technology, computer hardware or technical skills to implement, over and above what is currently the norm for online services. Such an approach would greatly assist in the management of initial costs.

c. What are your views on the anticipated ‘ongoing’ costs of the proposed changes and the impact of this on those you represent?

1. Ongoing costs would be manageable provided that there is a medium to long-term commitment on the part of HMRC to the provision of enhanced facilities under the new relationship. It would be damaging to the reputation of HMRC, and commercially very damaging to our members, if, having made the necessary investments and carried out the necessary enrolments, enhanced access to services ceased to be available in future years.

d. Do you consider that these proposals would have a disproportionate impact on smaller agent businesses, for example, those with less than 20 employees? How could these impacts be addressed?

1. It is possible that larger agent businesses would benefit more from the proposals through economies of scale in terms of IT and communications infrastructure investment. As against that, the time-saving and efficiencies available to firms of any size should be a direct factor of the number of clients. As already mentioned, keeping the self-serve infrastructure requirement as modest as possible might go a long way to addressing this concern.

e. Do you consider that these proposals would have a disproportionate impact on unqualified or unaffiliated agents? How could these impacts be addressed?

1. Unqualified or unaffiliated agents may not have made the same investment in training, continuing professional development and regulation compliance as their affiliated counterparts. If, as a consequence, such agents have more ground to make up before being in a position to fully avail of the proposed new environment, it is hard to describe that kind of impact as disproportionate.

Conclusion

Self-serve proposals are attractive (provided the cost savings outweigh the extra work to be taken on by agents) but balanced against this will be the need to register with HMRC and satisfaction of IT security requirements by both parties to the relationship. At this point it is difficult to assess the potential level of costs or potential dispropor-tionate impact without knowing the specific design of the self-serve system.

Once self-serve has been introduced, HMRC must not neglect to work on improving service standards. The proposals to improve knowledge of agents should help HMRC manage risk more effectively and allow for professionally qualified, highly-competent tax agents to receive proper credit for their work. It will be important to ensure that agents whose work may be identified as poor are given a chance to improve and where necessary to challenge HMRC's view.

As an over-arching principle HMRC should not adopt a regulatory stance for the professional Agent community, the purpose of these proposals should be to enhance compliance activity for those in the agent community who are already compliant.
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Eamonn Donaghy

Chairman, Northern Ireland

Tax Committee, Chartered Accountants Ireland

Source: Chartered Accountants Ireland. www.charteredaccountants.ie