The definition of “tax advice” should be broadened out to include umbrella companies and tax software providers according to the Chartered Institute of Taxation (CIOT) in their response to HMRC’s consultation on “Raising standards in the tax advice market”. They say that a wider definition of tax advice is vital to raise standards and enable redress when things go wrong.
HMRC’s consultation seeks views on proposals to introduce a requirement for tax advisers to hold professional indemnity insurance, including minimum levels of cover, and how the policy could be enforced and implemented, and a definition of tax advice.
CIOT supports the proposal that all tax advisors should have professional indemnity insurance, and firms dealing with riskier areas of work will need to review current systems and work to obtain cover at an economic rate and maintain their business.
Many umbrella businesses will argue that they are not providing tax advice as they are simply employing temporary workers, the only tax element is processing payroll which does not constitute “advice”. However, with the sector coming under ever-increasing criticism and disguised remuneration schemes purporting to be compliant umbrellas this is a difficult argument to uphold.
In addition, the thousands of Loan Charge victims who were mis-sold a tax scheme (whether they were aware of it or not) would have been able to seek redress if this type of operation had been defined as “tax advice”.
For these reasons it seems likely that umbrella companies will be defined as tax advice in future, providing an easy quick-win for the government which is under pressure to regulate the sector.