Speaking at Chartered Accountants’ Hall on 25 November, McCann, Consultant at Charter Tax and former President of the Chartered Institute of Taxation (CIOT), used his presentation of ICAEW’s annual Hardman Lecture to call for tighter regulation of the tax profession.

Drawing on his previous experience as a senior figure at HMRC, where he oversaw the introduction of the disclosure of tax avoidance schemes (DOTAS) rules, McCann highlighted a number of gaps that bad actors are exploiting to spread tax avoidance schemes.

‘Shadow advisers’

Crucially, he pointed out, anyone can present themselves as a tax adviser. There are no requirements to hold a professional qualification, and ‘tax adviser’ is not a protected term.

In the UK, he said, advisory firms are currently assisting around 12m taxpayers. But at least 30,000 advisers are estimated not to be affiliated to any professional body. Factor in those in supporting roles, and the sector’s total number of unaffiliated people is “much greater.”

For McCann, low barriers to entry have combined with that affiliation gap to make way for ‘shadow advisers’: individuals “who never interact with HMRC, and even deny that they’re giving tax advice.”

In his view, their scope to devise and spread avoidance schemes is being widened by three issues:

1. As evidenced by disguised remuneration and R&D tax credit schemes, among other problems, the government’s whole approach to tax policy is attracting bad actors.

1. HMRC’s ‘repay now, check later’ policy is encouraging fraud.

1. Taxpayer education and attitude are leaving much to be desired. “Too many clients assume a level of professional qualification that may not exist,” McCann said.

Encircled with scrutiny

In its recent Budget, McCann said, the new government proposed that, from April 2026, all advisers who wish to interact with HMRC will have to formally register with it. However, he noted, there is an obvious flaw: ““The main problem is advisers who don’t interact with HMRC – and don’t want to.”

Ironically, McCann pointed out, current supply-side regulatory measures from HMRC are hardly in short supply. Alongside DOTAS, examples include the General Anti-Abuse Rule, HMRC’s Standard for Agents, Stop Notices – now with criminal sanctions – and the naming and shaming of promoters.

In tandem, the Solicitors Regulation Authority, Information Commissioner’s Office and Advertising Standards Authority each have enforcement roles in the field. Add in TaxWatch, other lobby groups, individual commentators and both traditional and social media, McCann said, and the tax profession is “completely encircled” with scrutiny.

Yet despite all those contingencies, he noted, unscrupulous advisers and promoters “have been able to get away with it too often. And the reason they’re getting away with it is because the system doesn’t work properly.”

Tougher sanctions

As such, McCann believes, mandatory membership of a professional body for all advisers will tighten up controls in the long term.

For now, though, DOTAS’s scope must be expanded. “The fundamental point,” he stressed, “is that you shouldn’t be able to market a tax-planning scheme without some level of engagement with HMRC.”

Alongside that step, McCann noted, there are several other immediate actions that the government and HMRC must take.

• The proposed registration scheme must apply to everyone involved at any stage of a process that culminates in a taxpayer making a claim, or filing a return, with HMRC. 

• Government must ensure that effective penalties, including criminal sanctions, exist for cases where unregistered individuals give tax advice.

• HMRC should have power to suspend a registration to prevent an individual from giving advice for the applicable period – with safeguards and appropriate civil and criminal sanctions to kick in if the suspension is breached.

• HMRC should have discretion on whether or not to accept a registration. For example, it may choose to decline registration if an individual has been suspended or expelled from a professional body.

McCann concluded: “Unless HMRC can operate closer to real time, and unless it can effectively regulate the shadow advisers – preferably out of the market – then it’s just a matter of time before we’ll be having this conversation again.”