INTRODUCTION
In the first part of this article on the catchy new “Prohibition against unregistered tax advisers interacting with HMRC”, we looked at:
- Why these provisions have been introduced;
- What these rules are and how they will be implemented
- When they will be introduced
- The ‘so what?’
- Who the rules apply to
In Part Two, I belch out a stream of consciousness around whether these rules will work.
For HMRC, will it represent ‘a Design for Life’ or will they will left with a feeling of emptiness. Motorcycle Emptiness, even…
ACT SIX – TAKING CARE OF BUSINESS???
So, I’ve set out the rules above.
What changes, if any, might this drive?
As per the above, this is mainly a stream of consciousness. Some thoughts fully baked, some half-baked… others all a bit too doughy!
So, don’t take this as a playbook… or I’ll send the Memphis Mafia after you.
Rebate / claims companies
Let’s start with the obvious, it is likely to mean that many such companies will have a requirement to register and maintain a base level of standards assuming they are going to interact with HMRC under their own account.
However, HMRC has always had the ability, if not expressly in law then certainly in practice (I have seen it happen), to cut off claims agents where they believe their standards are shoddy (for example because a high percentage of claims are rejected).
So, will these changes make a difference?
It is difficult to anticipate, but one assumes that there will be a number of ‘chancers’ who see the registration requirements as simply another obstacle to conquer (yes, the dullest episode of Gladiators[1] / Ninja UK ever)
You see, money talks. As we have seen with years and years of umbrella companies, there is seemingly no short supply of straw men and women who will go on to companies that have a limited shelf-life and are likely to end in a bin-fire.
However, the lack of any requirement for qualifications, experience or fit and proper test means that there is limited difficulty in a serial bad actor simply phoenix-ing these claims / rebate companies. The companies will simply find the next straw man or woman[2]. Like the proverbial hydra, once one head is cut off, another takes its place.
That said, I might be imbuing them with a level of professionalism that is neither deserved or necessary. It seems to me to be entirely possible that some of these companies will simply take a back seat, take over a taxpayer’s online account, and make the claims that way. Again, this would seem to short-circuit the system.
As such, a simpler solution would be to make such interactions limited to those who are members of professional bodies or can meet a higher threshold some other way (for example, so, for example, ex-HMRC advisers who are not members of professional bodies are not excluded).
Umbrella company tax schemes
I mentioned these in the Part One.
Although the new joint and several liability rules are likely to end the last remnants of this industry, it is worth commenting on some of the additional requirements for businesses run from overseas.
Umbrella companies, and particularly mini-umbrella companies, had a particular feature over recent years that directors were often overseas.
The register brings in special rules where relevant individuals are non-UK resident:
“If your business or any relevant individuals operate outside of the UK, you’ll need to be able to send authenticated evidence to HMRC when registering for an agent services account. This will prove that you meet the conditions for registration.
To show their authenticity, any documents you send will need to:
-
be notarised by an independent and qualified notary (or an equivalent professional)
-
have a certified English translation (where applicable)”[3]
It might well be that these rules are designed with at least one eye on umbrella type companies that are operated from overseas. However, I would suggest that these would be the least of a promoter’s concerns bearing in mind the new JSL rules.
Tax scheme promoters
I don’t think these rules are really aimed at those who are promoting tax avoidance schemes.
There are much scarier rules out there. In any event, and as seen in the past, I suspect a promoter would simply set up their own, separate compliance entity to deal with any tax disputes that arose from their schemes.
Splitting of business activities
Indeed, circumvention, to the extent anyone would want to circumvent the rules, seems relatively straightforward. One really just needs to avoid the interaction point.
Let’s say I have an advisory firm. I don’t do any compliance or tax disputes. However, I might advise on the odd corporate transaction, make the odd R&D claim, advise on IHT and some other non-compliance projects that only infrequently have a touch point with HMRC.
The corporate transaction might require the odd clearance application or share valuation. Formally, the R&D advice will require a submission.
There is unlikely to be any of the IHT work, other than perhaps a non-statutory clearance, that requires interaction with HMRC.
As such, we simply split the business into two entities – one that handles advisory, and another which handles registrable activities. The staff of the existing business are appropriately decanted between the two.
But, in life, the best question is usually “why?”
Outsourcing
Outsourcing is perhaps a slightly less drastic step than the scenario above. In my mind, this involves introducing bits of work to a third party.
For example, a tax lawyer who advises on corporate transactions who, for whatever reason does not want to register, might outsource the clearance submission to a friendly accountancy firm who can bill for that discrete part of the work.
Of course, contractual relationships (and insurance – yawn) will be important here.
Interestingly, I have seen the outsourcing point arise in the context of conveyancers who are perhaps the most ‘controversial’ professional to be (inadvertently?) sucked into this regime.
Generally speaking, the solicitor will be responsible for completing the SDLT return and this is clearly enough to trigger the interaction point.
So, as I have seen proposed, could a conveyancer simply outsource that tax return to a partner accountant or tax adviser and merrily carry on as before?
The snag is that the regime doesn’t just mean “filing the return.”
The statutory definition of “interacting with HMRC” is, as we have seen, deliberately broad.
It covers calling, emailing or writing to HMRC, messaging through an online portal, filing “a return, claim, notice or other document”, and then, crucially, the catch‑all of “communicating with HMRC in any other way.”
That’s why the “payment-only” workaround might just be wishful thinking.
This is because the emerging message from HMRC stakeholder discussions is that paying SDLT to HMRC on behalf of the client may itself be treated as “interaction”, meaning that the conveyancing firm would still need to be registered even if the return preparation and filing is outsourced.
HMRC were reportedly asked to confirm this and publish clear guidance because it’s commercially determinative for how firms redesign their processes.
And the mortgage reality makes this more than a theoretical puzzle. At least some lenders’ instructions expect the conveyancer, before releasing the loan, to hold either a properly completed SDLT form or the borrower’s authority to file the return and to ensure SDLT returns are completed and submitted so the charge can be registered within the priority period.
In practice that’s one reason conveyancers often end up “owning” the SDLT mechanics, including timing and (frequently) the payment flow. Outsourcing only the form while keeping the money movement in‑house may not be compatible with the way transactions operate.
It seems to me that the firm will simply be left with little choice other than ‘owning’ the process and registering.
It is worth noting that registering as a “tax adviser” under these rules does not mean they are suddenly holding themselves out to be SDLT or property tax experts. Again, the terminology here is not helpful. That said, where there are unusual or high level transactions, it might make sense for solicitors who do feel out of their depth to seek advice from the many experts out there.
Ongoing review of “relevant individuals”
Organisations are likely to have to conduct ongoing internal due diligence around key stakeholder’s personal compliance because conditions attach to relevant individuals.
This is awkward in practice because some conditions attach to relevant individuals’ personal affairs (their own overdue returns/tax, insolvency status, director disqualification, certain unspent convictions).
A firm won’t automatically know those things.
So, you either build internal processes (onboarding checks, annual self‑certification, and a duty to notify if status changes) or you accept you’re trusting people not to quietly torpedo the firm’s registration.
Which will it be?
In-house impact
As briefly mentioned above, in-house teams have a few potential wrinkles, despite HMRC’s own guidance says you don’t need to register if you’re an employer / in‑house team running payroll for your own staff, or if you only deal with tax affairs within your own company group.
As such, the classic “group tax team” talking to HMRC for its own subsidiaries should be fine.
However, the snag is that the “company group” concept is tighter than people might assume. This is because it is a Companies Act “group undertaking” test, meaning joint ventures, portfolio companies, fund vehicles and other “not‑quite‑a‑subsidiary” structures could fall outside it.
In such cases, an ‘in‑house’ team starts to look, for these purposes, like an external adviser (I won’t say ‘out-house’ as that has other connotations).
Similarly, a family office interacting with HMRC for multiple family members, trusts or SPVs can look like a paid adviser rather than a pure “in‑house” function, even if it feels “internal” culturally.
The practical takeaway is boring but vital.
One needs to map who actually contacts HMRC in your organisation, for which entities, and then test whether those entities are genuinely within the same Companies Act group (not just “we own a chunk of it”)
ENCORE
Memphis, hotel room, 2:17am
A flipchart, with writing scribbled in black marker pen, reads “International Committee of Elvis Impersonators: Proposed new registration conditions”
Delegate One: Right. We need a framework. A simple one that regulates who act as an Elvis Impersonator. How about ANYONE who goes on stage dressed as Elvis and sing Elvis songs needs to register?
Delegate Two: No.
Delegate One: No?
Delegate Two: We need something that looks like that at first glance… but the longer you stare at it, the more you realise it isn’t.
Delegate One: Okay. Not sure I really follow you. But what do you suggest?
Delegate Two: When you think of Elvis, you think of that white jumpsuit, right. So, the purchase of the jumpsuits should be the trigger for registration.
Delegate One: You mean… we’re not regulating performances?
Delegate Two: Correct. Not the act. Not the talent. Certainly not the quality of the singing. Just the apparel…
Delegate One: But… what about people who are performing and dressed as his Jailhouse Rock phase?
Delegate Two: That’s fine.
Delegate One: [Scratches head] So, we are actually mandating registration for those wearing white jumpsuits?
Delegate Two: No. The colour is irrelevant.
Delegate One: Errr, ok. And what about the songs they sing?
Delegate Two: Wholly irrelevant.
Delegate One: So, someone could wear a jumpsuit, of any colour, and sing anything?
Delegate Two: Absolutely anything.
Delegate One: You do know that this would include, say, Britney Spears singing Oops I did it again?
Delegate Two: If that makes her a registrable Elvis impersonator, so be it.
Delegate One: Right…
And that, in essence, is the regime… not regulating the performance, but controlling the access to the stage
And with that, tax Elvis has left the building.
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[1] To take this mental wondering further, and if anyone has got as far as these footnotes, please give me your best suggestion for a tax themed gladiator…
[2] I talked about the issue of stooge directors of umbrella companies, and proposed a solution, several years ago: https://taxbarristeruk.com/any-umbrellas-to-fix-today/
[3] https://www.gov.uk/guidance/check-if-you-meet-hmrcs-conditions-to-register-as-a-tax-adviser