PI insurance could be compulsory for tax advisers under government plans

piggy bank

SHARE

The government is to consult on making professional indemnity insurance (PII) compulsory for tax advisers after warning that that some advisers are incompetent and that some actively bend or break the rules.

 

The proposal is set out in a summary of responses to the government’s call for evidence into ‘Raising standards in the tax advice market’, published in November 2020.  The government says making PII compulsory will raise standards in the tax advice market, provide recourse and protect consumers.  It believes the measure will drive out advisers who are unable to get insurance as a result of riskier practices.

Law firm DWF says that around 70% of tax advice is provided by professionals who are already required to take out PII by their professional bodies.  It says that the government is focused on the 30% of advisers who are not members of professional bodies and are not required to carry PII.

Existing industry standards for tax advice, such as HMRC’s ‘Standard for Agents’ and the ‘Professional Conduct in Relation to Taxation’ (PCRT) standard, do not carry legal force.  The government says it will review HMRC’s powers of enforcement, as at present HMRC can only act against tax agents who have committed a crime such as money laundering.

The government says it also wants to work with professional bodies to understand the role they play in supervising and supporting their members and raising standards in the profession.  In addition it is planning to review the charges made by agents claiming tax refunds on behalf of their clients.

Concerns have been raised about the government using the insurance market as a means of regulating tax advice. DWF says there is a risk that the insurance industry “will reject the quasi regulatory role that Government is seeking to force upon it, by indicating that it is simply unwilling to cover the types of activity that Government would like to see covered.”

James Burgoyne of Brunel Professions says that most tax advisers are highly professional and already hold PII insurance thorough their professional body regulation. “The government’s move appears targeted at a sub-set of the unregulated advisers who provide aggressive and highly contrived tax planning structures, but this is a sector which overall the PII insurance market may not want to cover and especially in the present hard market conditions,” he said.

The government’s summary of responses to its call for evidence has been published on its website.  Reports about the issue have been published by DWF, Tax Adviser magazine and the ICAEW.

Professionalindemnity.com is owned by Brunel Professions, which is a leading professional indemnity insurance broker in the UK.  Click here to get a quote or call 0345 450 1074 to speak to a broker.

Menu