COMPLIANCE
To advise or not to advise?
The CIPP policy and research team discusses the recent HMRC consultation; Raising standards in the tax advicemarket, considering potential implications for payroll professionals
A tax adviser: a payroll bureau about taxable benefits, tax software that carries out categorisation or calculations, a bookkeeper maintaining financial records and preparing year end returns. These were all examples of activities and professionals who may be providing tax advice, according to the consultation Raising standards in the tax advice market – released on Tax Day in March managing an outsourced payroll, an employer advising an employee 2021(http://ow.ly/TcpD30rScWf). The consultation considers whether mandatory professional indemnity insurance (PII) should be required for individuals providing tax advice. Given there is no current legal definition of tax advice, it also explores who should be considered a tax adviser. The CIPP asked the question, are payroll professionals tax advisers? 22% of almost 700 attendees at the 2021 BeConnected national forums said yes – they consider themselves to be tax advisers. The CIPP think-tank discussion with members in May 2021
highlighted several examples where payroll professionals could provide tax advice. In June 2021, the CIPP published its response to the consultation. This article explores some of the key themes raised. Information, guidance and advice The term ‘payroll professionals’ covers a wide remit of individuals who are involved in delivering payroll services. Overall, the profession engages in the provision of information, guidance and advice. However, individual responsibilities can differ substantially depending on the role that is being delivered. What is involved in these three areas? ● information – providing facts, statements and data to clients and employees, for example, the amount of tax deducted on a payslip ● guidance – providing the reason behind a particular tax position, for example, an explanation of the calculation determining entitlement to statutory maternity pay, or pointing to the best practice approach ● advice – providing a recommendation
or taking action to change the end tax position of the individual or company. Payroll processing, calculating gross to net pay, and dealing with employee or client queries are areas familiar to most payroll teams. For individuals delivering these services daily, they will often state that advice is not part of their remit. The CIPP encourages and empowers payroll professionals to push back where they are asked to provide tax advice, as it is a specialist skill which could have far reaching ramifications. Whilst many payroll professionals have extensive knowledge in this area, careful consideration should be given before providing tax advice. There is, of course, a fine line between advice and guidance. The payroll function has a unique position, impacting every employee in a company. The information held by payroll makes it a trusted source, a confidant, with many employees and clients looking to payroll professionals for guidance and support with their wider financial affairs. Take a tax code, for example: payroll receive a tax code from Her Majesty’s Revenue and Customs (HMRC) and are obliged to process the individual’s pay using that tax code – that is the end of
The CIPP asked the question, are payroll professionals tax advisers?
| Professional in Payroll, Pensions and Reward | October 2021 | Issue 74 26
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