The Chartered Institute of Taxation (CIOT) has called on the government to include non-compliant umbrella companies in their plan to redress the impact of poor tax advice on freelancers and other self-employed workers.
The CIOTs calls have come in response to an HMRC consultation that is aimed at ‘raising standards in the tax advice market’, which has been launched following a recommendation by Sir Amyas Morse to ensure the self-employed and small business owners are receiving accurate advice from umbrella companies and other advisory bodies.
According to the group, HMRC is proposing the introduction of a compulsory requirement for tax advisors, including umbrella companies, to hold professional indemnity insurance (PII) and is seeking feedback on a definition of tax advice that will be responsible for making it clear who will require PII.
John Cullinane, director of public policy for CIOT, said about the consultation: “A wide definition of tax advice is vital to help HMRC use compulsory PII to raise standards across the tax advice market, improve the public’s trust in tax advice and enable taxpayers to have redress when things go wrong.
“A widely drawn and principles-based definition of tax advice is essential if compulsory PII is to achieve its purpose,” he added. “If a provider of advice can be sued for the losses that their mistakes cause clients, then it is wrong if the client cannot be compensated because they do not have the funds to pay out. That is why they should be insured.”
