Government consults on raising standards in the tax advice market

The Government issued a consultation in March 2024 on raising standards in the UK tax advice market, through strengthening the regulatory framework¹. It set out different potential models for regulation: mandatory membership of professional bodies, a hybrid system involving both professional bodies and HMRC, and the establishment of a new independent regulator¹.

The consultation follows an earlier one in 2021, which focused on requiring tax advisers to hold professional indemnity insurance and on the definition of tax advice. The government concluded that compulsory indemnity insurance would not be an effective mechanism for raising standards, and so the proposal was not enacted¹.

The market the consultation covers is large and, on the evidence in the report, unevenly overseen. Around 85,000 tax advice firms assist 12 million taxpayers in the United Kingdom¹. Anyone can establish themselves as a tax adviser regardless of qualifications or competence¹. Research conducted on behalf of HMRC estimates that around two thirds (68%) of tax agents are members of a professional body, with membership varying by size: just over 50% of agents with turnover of less than £60k were members, whereas 86% of agents with turnover of £60k or above were members¹.

The report sets out the scale of the losses attributed to fraud and error in one relief. In 2020-21, HMRC estimated £1.04 billion, 24.4% of the scheme's total expenditure, was lost to fraud and error, while this proportion decreased to 7.8% (£601 million) in 2023-24¹. On the wider tax gap, in 2022-23 the gap was estimated at nearly £40 billion, equivalent to 5% of total tax liabilities, of which £13 billion stemmed from criminal activity, evasion, and avoidance¹.

The report also records the size of the professional bodies that would sit at the centre of a mandatory membership model. Reported figures include:

Why it matters for households

Taxpayers remain responsible for the accuracy of their returns even where they have relied on an adviser, and can face repaying tax with interest and penalties for errors¹. The report describes "shadow" advisers who prepare returns that taxpayers submit themselves, collect fees upfront and disappear before HMRC identifies issues, leaving taxpayers unrepresented during enquiries or disputes¹. It also notes that the Solicitors Regulation Authority only began systematically monitoring them in 2023¹.

Two dated changes sit alongside the consultation. Tax practitioners who "interact" with HMRC will be required to register with HMRC from April 2026¹. The government also stated its intention to consult in the future on measures to increase HMRC's powers to act against tax practitioners who facilitate taxpayers' non-compliance, during 2025¹.

What happens next

The consultation set out three potential models for regulation¹. The report states that the government intends to consult during 2025 on increasing HMRC's powers against practitioners who facilitate non-compliance¹, and that registration with HMRC for practitioners who interact with it is required from April 2026¹. No outcome of the March 2024 consultation has been reported. The regulation of financial services in the UK is set out in more detail in our guide.