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What it takes to be a tax adviser

What it takes to be a tax adviser

There are many IFAs who call themselves tax advisers without being aware of specialist knowledge that such a role requires, warns Mark Lee of Tax Advice Network.

What do you think it takes to be a tax adviser? It is one of those unregulated terms. Anyone can claim to be a tax adviser. Some accountants do it. Some financial advisers do it. Some people with no professional qualifications do it.

Many people assume that all accountants are also tax advisers. Mind you, many people assume that all accountants have a professional qualification. Again, it is an unregulated term. Anyone can describe themselves as an accountant.

Is a tax adviser someone who completes self-assessment tax returns for clients? Someone who advises people how to pay less tax? Someone who knows about inheritance tax? The list goes on.

My qualifications

For 25 years from 1981 to 2006 I was a tax adviser. I had qualified as a chartered accountant and later become a fellow of the Chartered Institute of Taxation. I was (and remain) active in the accountancy and tax profession. During my time in practice I met many financial advisers but I do not recall any of them evidencing much tax knowledge. Of course the diploma and advanced diploma in financial planning only came into existence in 2006.

I remember being quite shocked when I first realised that if you search for ‘tax advice’ online you will often be directed to an IFA. I wonder whether most people seeking tax advice are looking for an IFA, for an accountant or for a tax adviser, always assuming they know the difference!

There are two issues here. The first is whether IFA tax advisers are kidding themselves. The second is whether clients are being misled and confused. To be fair this can also happen when they approach accountants and qualified tax advisers. But as this is New Model Adviser® I want to focus on IFAs.

The IFA as a tax adviser

If you advise clients about the tax implications of investments and pension products then of course you are a tax adviser. You may be reliant on the product provider to explain all the tax issues but that is fine. And of course certain elements of taxation were covered in the exams for AFPC (now the DipPFS) and other qualifications too.

There are two questions to consider here though. The first is whether you really understand all of the tax consequences of specific tax-favoured investments and strategies. The second is when a client needs more comfort about the tax consequences of your advice than you are able to provide.

In both scenarios I suspect that many IFAs are often in the same position as many accountants. You are almost better able to provide sufficient comfort if you only have limited tax knowledge. The more you know the more difficult it is to avoid focusing on the risks and the downsides.

Those IFAs who promote themselves as tax advisers need to ensure that they have access to back up tax advice and support. But that costs money, unless it comes from the product providers. But how confident do you feel that you are getting an objective view on tax matters from someone who is clearly not independent? How does that make you feel when you have promised your clients that you will provide them with independent advice?

The client’s view

Most people are inclined to believe their expert advisers, whether they be doctors, dentists, lawyers, accountants or IFAs. Indeed IFAs should be the most trusted as you are the only experts who stress the fact that you offer independent advice.

That means independent of any specific providers, not tied to one or more companies. However, it does not mean ‘wholly objective in all respects’ does it?

The point is that, unless they have had previously bad experiences, most clients trust their advisers. They assume you know what you are talking about. They value the assurances you provide and they take your advice.

Their reliance on your advice is not limited to financial products, investments and pensions. It extends to the tax issues on which you advise.

A case in point

This was brought home to me recently when I met someone, I’ll call ‘Stan’, at a networking event. His badge said he was from ‘XYZ Capital Management’.

This is pretty much how the conversation went:

Me: And what do you do at XYZ Capital Management?

Stan: We help wealthy people manage their capital.

Me: Are you financial advisers?

Stan: More than that. We can help people reduce the tax they pay down to zero, using approved tax schemes.

Me: Approved by whom?

Stan: HMRC. We only use approved schemes that have been fully disclosed under Dotas.

Had I not been a specialist I might well have been hooked, always assuming Stan had gone on to explain that Dotas stood for disclosure of tax avoidance schemes.

It is not Stan’s fault. He could not have known that I was well up on such matters and have been writing and blogging about the misconceptions surrounding tax avoidance for some years. His business card described him as a ‘financial and tax adviser’. I suspect that Stan knew all he needed to know. I hope he was a salesman and not a professional IFA as he was wrong about the approval of his tax saving scheme.

How do I know? Simple. HMRC never approve tax schemes. However, Stan’s assertion is so common that HMRC recently revised the Spotlights page of their website to make their position clear beyond any doubt. Dotas simply requires schemes to be notified to HMRC which then issues a registration number. This number must be entered on tax returns by those taxpayers who use the scheme. It flags them up and increases the prospect of enquiries down the line, possibly many years later. It could not be further removed from a badge of official approval.

Maybe there is a lesson here for IFAs who describe themselves as tax advisers.

Mark Lee is chairman of the Tax Advice He writes a regular blog debunking choice tax stories in the media: Mark’s personal website and blog are at


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