Robert Kerr: Cowboy accountants are costing tax man a fortune

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HM Revenue & Customs is costing the UK billions in lost revenue by turning a blind eye to the problem of unqualified cowboy accountants preparing bogus accounts and tax returns without reference to books and records.

When concerns about small business owners having spurious accounts prepared by unqualified accountants were raised with HMRC, our concerns were met with a “knowing look” with no indication that any follow up action against the accountants identified would be forthcoming.

I know of a number of business owners who have been told by unqualified accountants that they have no need to maintain books and records. Rather, they simply turn up at their unqualified accountants’ premises once a year for a brief meeting, during which figures are plucked from thin air and submitted to HMRC.

While Chancellor George Osborne recently announced the Treasury’s plans to introduce a General Anti-Avoidance Rule (GAAR) to seek to improve HMRC’s ability to tackle tax avoidance, I would suggest HMRC should also pay heed to the billions of tax revenue lost from small businesses having spurious accounts prepared by unqualified accountants.

A recent survey from the Institute of Chartered Accountants of Scotland Small Firms Working Group highlighted a concern that the public interest is not well served by the existence of unqualified accountants, as members of the public will not necessarily be able to assess whether unqualified accountants are competent and appropriately regulated.

The issue could be resolved overnight if HMRC introduced a requirement that only qualified accountants can prepare accounts in order to submit tax returns on behalf of businesses. It’s scandalous that anyone can set themselves up as an accountant and operate without regulations.

Just as home owners are required to appoint a qualified conveyancing solicitor to buy and sell a property, it should be a requirement that business owners appoint a qualified accountant to prepare accounts in order to submit tax returns.

That one simple change has the potential to add on billions of pounds to HMRC’s tax take – at a time when the country needs it most.

• Robert Kerr is chairman of chartered accountant French Duncan.