A government consultation on the registration of all organisations who provide tax advice and interact with HMRC could see lawyers required to register with the agency under new legislation.
HMRC have identified a need to raise minimum standards across tax advisors with the proposed changes designed to ‘improve HMRC’s ability to monitor and exclude tax advisers who are objectively unable to meet HMRC’s Standards for Agents or cannot lawfully act as a tax adviser.’
But the proposed legislation is ‘so broad that many legal professionals who do not hold themselves out as tax specialists, or who are not in any real sense tax advisers, would be caught’ said The Law Society in their response to the consultation. The current wording refers to ‘tax adviser’ and ‘interaction with HMRC’ which in the view of the Law Society would include conveyancers completing SDLT returns, corporate lawyers drafting commercial contracts between parties or legal documents which include conduct provisions or indemnities or warranties.
HMRC says there is support for raising standards in the the tax advice market, strengthening the regulatory framework and improving registration. It’s initial consultation found strong support for mandatory registration which would ‘enhance the security of tax adviser services and deter unscrupulous actors.’
But the Law Society said the definitions in the draft legislation goes beyond that target and should focus on those who routinely act as agents in relation to a client’s tax affairs, or who hold themselves out as tax advisers.
“As currently framed, the draft legislation, is cast too widely and risks imposing significant new burdens and uncertainty on advisers. That is particularly true for sole practitioners and small firms. Most importantly, it also does not deliver better outcomes for taxpayers.”
said Law Society president Richard Atkinson.
The Law Society goes on to outline how compliance with yet another regulatory regime would not only duplicate work but would unfairly hit SME law firms whose resources are already stretched when it comes to compliance. Further clarification is also required when it comes to the definition of an ‘organisation’ in the draft legislation. Requiring individual and firm registration would create ‘unnecessary duplication and cost’ but the implication firm registration is sufficient is not consistent;
“Law firm structures can be complex and, a single organisation may involve more than one partnership. HMRC should define what “organisation” means in this context…This principle should be placed beyond doubt in the legislation.“
The use of the phrase “senior manager” within firms needs reviewing, particularly where in large and complex law firm structures senior managers may have no involvement in the tax practice or have any interaction with HMRC.
For conveyancers and their clients the consultation raises the prospect of whether home buyers should seek separate representation for SDLT advice, increasing the already lengthy time it takes to complete on property purchases. ‘Indeed, effectively requiring separate tax advice across general practice areas would unduly impact small to medium law firms, and the private individuals and families who commonly access them’ the consultation response goes on to say.
In response to the consultation, The Law Society’s recommendations include:
- Limiting the regime only to those who routinely act as agents in relation to a client’s tax affairs, or who hold themselves out as tax advisers.
- Providing greater clarity on the differences between firm-level and individual registration requirements.
- Giving further consideration to the territorial scope of the measures.
- Revising the conditions for registration to better reflect the reasonable expectations of a tax adviser.
- Avoiding duplication by excluding professionals already subject to other regulatory regimes.
The government will mandate registration from 1 April 2026 and said it is investing £36 million to modernise existing registration services.
Read the Law Society’s response to the consultation in full here.
