A comprehensive report on the UK tax advice market has revealed alarming gaps in regulation that leave both taxpayers and public finances vulnerable to significant harm. The report, published by TaxWatch, includes testimony from victims of mis-selling of financial products with disastrous tax consequences for the client and no penalty for the adviser illustrating the importance of much needed reform.
The Wild West of tax advice
The report highlights a tax advice market that operates like a regulatory Wild West, leaving individuals and businesses vulnerable to poor or exploitative advice.
“Our research has identified alarming gaps in the regulatory framework governing tax advisers,” said Claire Aston, Director of TaxWatch. “Unlike many other professional service providers, tax advisers currently require no qualifications or training and are subject to minimal oversight. This regulatory vacuum is causing real harm to both taxpayers and the public finances.”
The impact extends far beyond individual cases to undermine the wider economy, and public finances contributing to billions of pounds of ‘Tax Gap’ – revenues HMRC would otherwise collect annually.
The R&D tax relief example
A notable illustration of these challenges comes from the Research & Development tax reliefs. The repayable credits, intended to spur innovation, have become synonymous with eye watering levels of fraud and error. In 2020-21, HMRC estimated £1.04 billion—24.4% of the scheme’s total expenditure for small businesses—was lost to fraud and error. The scandal underscores the damaging role of ‘rogue’ advisers, who advise clients in making claims, receive an upfront fee and then disappear, leaving taxpayers to face the consequences if and when HMRC investigates.
“The consequences for taxpayers can be devastating,” explained Aston. “They face HMRC inquiries without support, often confronted with demands to repay tens or hundreds of thousands of pounds plus interest and penalties. Many believed they were acting responsibly by engaging what appeared to be professional tax advisers, only to find themselves financially exposed and with nowhere to turn for help.”
Current regulatory framework
The report examines the current system where oversight is primarily delegated to professional bodies (PBs) such as the Institute of Chartered Accountants in England and Wales (ICAEW) and the Chartered Institute of Taxation (CIOT). While approximately two-thirds of tax agents belong to one of these bodies, membership isn’t mandatory, and even for advisers who belong to one of these bodies the degree that such a body could actively regulate the profession is limited.
The report concludes that professional bodies face an inherent conflict of interest—they attempt to serve as both membership organisations representing their members’ interests via promotion of their qualification and courses and as regulatory bodies disciplining those same members in line with individual codes of conduct. The research finds that disciplinary processes are often frustratingly slow, lacking transparency, and rarely result in meaningful sanctions even for serious misconduct.
The report also notes that an estimated 30% of tax advisers operate entirely outside professional body oversight, creating further challenges for consistent regulation across the sector.
International approaches
The report examines regulatory frameworks in other countries to identify best practices. Germany’s fully regulated model ensures high standards but may restrict market access, while the Netherlands and Ireland employ self-regulation through voluntary compliance.
Australia provides the most relevant model for the UK, with its Tax Practitioners Board (TPB) established under the Tax Agent Services Act 2009. This independent regulator requires all tax advisers to register and meet specific educational and professional experience criteria. The Australian system enforces a legally binding Code of Professional Conduct covering competence, confidentiality, and fiduciary responsibility.
While the Australian system has faced challenges—including concerns about funding independence, inconsistent CPD standards, and enforcement transparency—it offers valuable lessons for UK reform. The report notes that Australia’s experience demonstrates “the benefits of structured oversight” while highlighting “the importance of ensuring financial and operational independence for regulatory bodies.”
Recommendations for reform
Based on its findings, TaxWatch recommends the creation of an independent regulatory body with appropriate statutory powers that would:
- Require registration and minimum qualification standards for all tax advisers
- Implement robust monitoring of compliance with professional standards
- Enable effective data sharing with HMRC to identify emerging risks
- Include proportionate enforcement powers
- Enhance consumer protection through accessible complaints processes and improved safeguards
The report concludes that these reforms would create a regulatory environment that better protects taxpayers while supporting qualified tax advisers in their practice. Effective regulation could help reduce economic impacts on individuals and businesses resulting from poor advice, while also addressing aspects of the tax gap related to non-compliance.
TaxWatch urges the government to prioritise these reforms, noting that the billions lost to non-compliance facilitated by unregulated advisers represent a significant opportunity to strengthen public finances while protecting vulnerable taxpayers from exploitation and getting into ruinous tax debt with HMRC.
The full report, “Regulation of tax advisory market: the effect of non-regulation and the case for change,” is available now
