By Jaimie Kaffash
13 October 2010
Tax take could be increased if Revenue and Customs gave more support to professional tax advisers, the National Audit Office has recommended.
The auditors’ report, Engaging with tax agents, was released today. It shows that tax returns filled in with the help of agents are more likely to have under-declarations of tax than those that filled in by individuals. The NAO suggests this is because tax agents often deal with more complex issues, but it adds that employing experts is ‘not without risk’ for a taxpayer. Targeting poorer agents and providing them with better support would help R&C to increase revenues.
The NAO estimates that a 3% reduction in the under-declared tax by agents could result in £100m extra revenue a year.
This can be achieved by better use of data by R&C, the audit office says. It adds that, although some steps have already been taken by the department, more could be done to achieve better value for money.
Auditor general Amyas Morse said: ‘R&C could achieve better value for money by increasing the level of tax compliance of taxpayers who are represented by tax agents, while doing more to minimise the costs of its engagement with such agents.
‘The department has a strategy for working more closely with tax agents but implementation will require a plan detailing how the expected benefits will be achieved. To the extent that there are opportunities to increase tax revenues significantly, it may make sense to incur some short-term set-up costs.’
Richard Murphy, director of the Tax Research group, told Public Finance that agents had a duty as well.
‘R&C has to engage with tax agents and there are some worrying signs that it is not doing enough,’ he said. ‘There have been massive problems with the agent authorisation process, which has been quite ridiculous over the past few years.
‘But that said, this is a symbiotic relationship and agents have to be open and honest with the tax authorities. The relationship of trust is a two-way street. In that case, agents have a duty to report their doubts to R&C just as much as R&C have a duty to report as well as they possibly can to agents.’
A spokeswoman for R&C said: 'We welcome the NAO report and its recognition of the steps already taken by HMRC to improve its engagement with tax agents. HMRC has a collaborative relationship with the tax agents community and will work with them to reduce costs, increase compliance and improve customer satisfaction.'
