Starting in May, the government requires local tax advisers to register mandatorily if they submit documents to HMRC on behalf of their clients.
Among those who may find themselves in violation of the law are conveyancing solicitors and payroll teams based in London, with penalties for compliance breaches reaching up to £10,000.
Under the broad definition of ‘tax adviser,’ professionals who interact with or submit documents to HMRC for clients must register by this deadline.
Rick Schofield, a tax partner at Azets—one of the UK’s top 10 accountancy and business advisory firms—warned that “costly errors are likely to occur among unsuspecting organisations or individual sole traders who help others manage their tax affairs.”
He noted, “This compliance shake-up is going to catch many people off guard, regardless of whether they are operating aboveboard. This includes situations related to stamp duty returns or inquiries about a PAYE code.”
This new requirement replaces a previous voluntary registration system.
Rick, who specialises in personal and company taxation, further explained, “All tax advisers in London who interact with HMRC on behalf of their clients will be affected. Tax advisers include those who provide professional tax advice and services, such as conveyancing solicitors, even if they are not strictly classified as accountants.
Payroll teams are also not exempt; registration is necessary even for simple actions such as emailing or using a portal to follow up on a PAYE code for an employee.”
Rick, based in Ashford, Kent, highlighted confusion among advisers in professional partnerships regarding whether the firm or individual partners would be held accountable for any breaches. “To ensure compliance, partnerships may choose to have each partner register with HMRC, even if they do not typically submit paperwork in the usual course of their responsibilities,” he suggested.
Concerns have been expressed to Parliament by the accountancy profession that the new registration requirements place an unfair burden on smaller tax adviser firms compared to larger ones.
Currently, many advisers are looking to HMRC for a detailed list of guidelines, but such clarity has yet to be provided, contributing to rising anxiety as the deadline approaches. “People simply want guidance and clarity,” Rick stated.
According to HMRC, this policy aims to ensure that all tax advisers interacting with HMRC on behalf of clients meet minimum standards. The changes are expected to enhance HMRC’s ability to monitor and exclude tax advisers who cannot meet these standards or who cannot lawfully act as tax advisers.
A digital registration process will be available, along with a non-digital option for those without online access. HMRC has announced an investment of £36 million to modernize existing registration services. The registration process begins in May, with a transitional period of at least three months for all tax adviser groups, and there are no registration fees.
In a policy paper published last November, HMRC indicated that individual taxpayers would not be directly affected by the new requirement for their tax advisers, whether based in the UK or overseas, to register with HMRC before acting on their behalf.
Rick noted, “However, individual taxpayers may face difficulties if their tax advisers cannot continue acting for them due to the new registration requirements or if they are under sanctions. This situation could leave individual taxpayers in a costly limbo, facing late penalties if their agents cannot send documentation to HMRC for any reason.”
Penalties for non-compliance range from £5,000 to £10,000.
Additionally, payroll teams are already under pressure due to the introduction of holiday pay compliance on April 6. The new Fair Work Agency can impose substantial fines or initiate criminal investigations for worker exploitation if paperwork is incorrect and employees are underpaid.
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