ECSH52700 - Accountants and/or Tax advisers - What would you expect to see

ECSH52700 Accountants and/or Tax Advisers - compliance visit overview

There is a significant overlap in the type of work that persons who practice as an accountant or a tax adviser do, but their roles and duties distinguish them from other types of Accountancy Service Provider (ASP).

Accountants and Tax Advisers are likely to be engaged to provide services in a variety of circumstances which can include: 

  • Preparing profit and loss accounts and balance sheets;
  • Submitting (or preparing for submission) tax returns under the self-assessment procedure of liability to Corporation Tax, Income Tax, Capital Gains Tax;
  • Completing and/or submitting VAT returns; 
  • Providing bespoke advice on specialist areas for example, Inheritance and Estate; Planning, Capital Allowance claims, Research and Development, retirement planning, drawing up financial projections to secure loan finance, etc.;
  • Calculating the tax owed by or any repayment due to the customer and advise when payment should be made;
  • Making tax repayment claims e.g. for expenses that are incurred by the customer in connection with their employment/business; and  
  • Facilitating Dispute Resolution with HMRC for their clients

Some accountants and tax advisers specialise in cases where the customer’s tax returns or their compliance with legal obligations are under investigation by HMRC. In some cases, these specialist ASPs are run by former employees of HMRC who will have worked on such cases during their career in the department. The aim of these specialist ASPs is to secure the best deal for the customer by avoiding prosecution and gaining the maximum mitigation of penalties in return for full disclosure and cooperation.

Some accountants and tax advisers specialise in getting tax repayments for customers and advertise their services on the internet. These are often on a no win/no fee basis. These firms are known in HMRC as High-Volume Repayment Agents (HVRAs). The repayment claims can be by way of a tax rebate e.g. based around expenses that are allegedly incurred by the customer in connection with their employment or business, or a tax refund e.g. where it is claimed that a higher amount of tax has been paid than was actually due. 

(This content has been withheld because of exemptions in the Freedom of Information Act 2000)

Some tax advisors specialise in advising on a specific area of tax only, without offering any other ASP services.

As with most ASPs, accountants and tax advisers are most likely to have some computerised records particularly if they are to submit online returns to HMRC.

A visit to an accountant or tax adviser, unless part of a medium or large firm, is likely to involve either a visit to a small office or to a private house, with many sole practitioners trading from a home office.

An accountant or tax adviser is likely (unless engaged to do VAT work where returns are either monthly or quarterly) to visit the customer only once or twice a year if they have only been instructed to prepare annual returns and/or accounts.

If the services required involve the submission of tax returns and corresponding with HMRC on behalf of the customer, the customer will sign a form ‘64-8’ which authorises the ASP to act on their behalf when dealing with HMRC.

Accountants and/or tax advisers are likely to be engaged to offer accountancy services, tax services, or both per customer and as such will see more business information or records from their customers from which they may identify suspicious activity – i.e. they will have a fuller picture of the customer’s activities. However, those who offer only specialised tax advice, will just see the business records relevant to the advice sought and therefore will have a limited view of a customer’s financial and business affairs from which to identify suspicious activity.    

At a compliance visit, an officer should seek to understand all ASP services (relevant activity) conducted by the ASP, how the ASP has risk assessed each service alone and in combination, and how it manages andmitigates those risks.

Record testing should span all of the ASP services provided. For example, where an ASP provides bookkeeping and payroll services, records should be selected where bookkeeping services have been provided, where payroll services have been provided, and where both services have been provided together.

Where the ASP also carries out relevant activity in another supervised sector, an officer should seek to understand the business’s compliance with the Money Laundering Regulations 2017 (MLR 2017) in respect of that additional sector(s). Record testing should span all sectors of relevant services provided by the business, including where provided in combination.

It is not unusual for an ASP to provide an ancillary service which would fall within the definition of services provided by a Trust or Company Service Provider (TCSP). In such cases the business is acting as both an ASP and a TCSP and its Anti-Money Laundering (AML) registration must reflect this, as must its compliance with the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer)  Regulations 2017 (MLR 2017) – including the requirement for being fit and proper tested to delivering those services. Providing TCSP services before an application for registration has been determined, which includes being fit and proper tested is a criminal offence.   

For such cases, you should refer to ECSH52775 and the TCSP sections of the Handbook at ECSH52000 for TCSPs for more information.

General money laundering, terrorist financing and proliferation financing risks for ASPs can be found at ECSH52625.  At a compliance visit, ASPs should be expected to provide an explanation for any departure from published guidance.