"Business beware": AAT warns over use of unregulated high street accountants and tax advisors

20 May 2021

A person packing belongings into a box

AAT has warned small and medium-sized enterprises against the use of unregulated high street accountants and tax advisors and urged the government to go further to tackle this issue. 

Examples of rogue behaviour encountered by AAT members in this area have included: 

  • charging to transfer: an AAT licensed member’s new client requested all handover information from the outgoing accountant. The information was not forthcoming in the agreed timeframe and the accountant requested £875 from the client to send the information – not only unusual, but unethical and forbidden by AAT’s code of ethics
  • made up figures: an AAT member focusing on a new client’s VAT returns found the previous tax agent had "made up" figures. The AAT member registered as the new agent and assessed the liability to be approximately £48,000, which was arranged to be settled in full
  • taking client funds: an AAT licensed member took on two taxi drivers who had previously used the same unregulated tax agent firm. The clients were unable to contact that company and it transpired that it had disappeared with client funds. 

The warning comes as AAT publishes the findings of a new survey of its members, with 77% of those surveyed saying they had experienced examples or seen evidence of lower standards of service from unregulated accountants. 68% also said unregulated accountants had caused their clients problems in the past. It would also appear that the risks continue to deepen with 44% of those surveyed advising that the impact from unregulated accountants had got worse since the start of the coronavirus (Covid-19) pandemic. 

The government is currently consulting on proposals to require unregulated accountants to hold professional indemnity insurance, which AAT has previously described as "inadequate". AAT has responded to the latest HMRC consultation on raising standards in the tax market, arguing that the most effective, simple and fair means of addressing the problem of unregulated advisors is to oblige anyone giving paid for tax advice to be a member of a relevant professional body. 

Adam Harper, Director of Professional Standards and Policy at AAT, said: "Small businesses are vital to the UK’s economic recovery following the pandemic. Yet many of them are still on a knife edge in terms of their viability – and poor advice from an unregulated high street accountant or tax advisor could plunge them into a dire financial situation, potentially leading them to shut their doors altogether. With our members’ survey showing the widespread impact that unregulated accountants can have on small businesses, we need the government to take decisive action on this issue now. However, their current proposals that would require unregulated accountants to hold professional indemnity insurance simply do not go far enough. 

"Mandatory membership of a relevant professional body for anyone offering paid-for tax and accountancy services would put accountancy on a par with professions such as nurses, architects and solicitors – all of whom must be a member of their relevant professional bodies – as well as lowering the number of agent-related complaints to HMRC and addressing issues such as money laundering and tax evasion. This would reduce costs both to individual taxpayers and to the Exchequer as a whole. 

"In the meantime, we would caution small businesses to beware of unregulated paid-for tax advice and ensure that their accountant or tax advisor is a member of a relevant professional body, such as AAT. Doing so will help them to reduce the risks of costly financial mistakes that could significantly damage their business, as well as giving them a viable route to raise any concerns if things do go wrong."

AAT is campaigning for a new legal requirement that anyone offering paid-for tax advice should be a member of a relevant professional body. There is currently no requirement for anyone offering tax and accountancy advice to be appropriately qualified or to be a member of a professional body and, as such, a third of the accountancy sector is effectively unregulated. 

Last month a survey published by AAT found that almost six out of ten people (59%) were unaware that anyone can trade as an accountant or tax advisor without any professional or formal qualifications. The survey also revealed that over half of people who had used an accountant or tax advisor thought it should be compulsory for anyone offering paid-for tax advice to be a member of a relevant professional body. A second survey showed that three-quarters of MPs were also in favour of mandatory membership of a professional body for anyone offering paid-for tax and accountancy services. In addition, the survey of AAT members demonstrated overwhelming support with 93% agreeing with the same mandatory membership proposition. mandatory membership proposition.  

For more information about this issue, see AAT’s latest blogs: