HOT TOPIC
R ecently, as part of the Finance Bill 2025, HM Revenue and Customs (HMRC) published draft legislation on mandating tax adviser registration. Whether you view payroll or payroll services as tax advice is up to you, but there are some key things in the proposals you need to be aware of. The draft legislation So, what’s being proposed? To try and simplify as much as possible, if you provide tax advice, or interact with HMRC on behalf of a client, you’ll need to register with HMRC and abide by HMRC’s standards for agents. Tax advisers (the business entity) will register and provide the details of senior management, who’ll be checked for any infractions with HMRC, such as outstanding tax. They must also meet minimum standards of conduct in their dealings with HMRC. Additionally, the business will be required to hold anti-money laundering (AML) supervision. The key to take away from this is that any business which interacts with HMRC on behalf of another business or an individual will be considered a tax adviser. This brings payroll services firmly into scope of the requirements. There are exemptions for pay professionals working in-house, or “in the course of a business carried on by that organisation”, as it’s eloquently worded in the draft legislation (https:// ow.ly/7pae50X03Tb), as well as for the provision of payroll software only. To get a full overview of the requirements and senior management checks, I’d suggest reading through the draft legislation in full, as there’ll be a lot of nuances we cannot capture in a single article. The planned implementation date is April 2026 with a transitional period of at least three months. Our response As is our duty, we needed to represent some concerns from the pay profession and blind spots we could see within the draft legislation provided. You can read our full response here: https://ow.ly/iVuz50X03VQ. Our first area of concern was with the terminology of ‘tax adviser’, with many in the industry feeding back that they didn’t consider themselves advisers. This legislation is aimed to raise standards in the pay professions, which is something we wholeheartedly agree with, but it feels right to differentiate the financial services
offered by pay professionals from those of accountancy services. Therefore, we suggested alternative terminology be used to avoid confusion of the services and expertise on offer from traditional accountancy advice. “The key to take away from this is that any business which interacts with HM Revenue and Customs on behalf of another business or an individual will be considered a tax adviser. This brings payroll services Secondly, and potentially most importantly, we asked for the transitional period to be set at 12 months, as opposed to the currently proposed three. However, we left the ball in HMRC’s court to determine if this should apply to everyone in scope or just pay professionals. The reason for this is twofold. Firstly, during our investigation around this proposal, it became clear that not all payroll services acting as agents were doing so through the agent services account (ASA), and agents using this account won’t be required to register via another method according to the plans. Instead, there are many who are either using the login credentials of their client (we don’t suggest this, by the way) or who are using a (now legacy) agent online services account (AOSA). It’s unlikely that agents using these methods will hold AML supervision, something that’s required to set up an ASA, and so these organisations would require more time to get up to speed with the due diligence, risk assessments and administration required for compliance. Coincidentally, there are also public sector organisations not using an ASA as they’re exempt from AML regulations, and this needs to be considered within the proposals. The second reason for asking for the transition period to be set at 12 months firmly into scope of the requirements”
centres on the availability of supervisors. Currently, pay professionals have two options for AML supervision: l HMRC, which can be costly and offers little support, or l an accountancy body, which requires membership to that professional body and offers support, but it can be more tailored to accountancy or bookkeeping situations. At the time of writing, the CIPP is exploring an application to become a supervisory body, to better support the pay professionals who’ll require AML supervision as a result of this legislation. If standards are to be raised in the profession, we feel we’d be best placed to offer support and guidance to our members in this area. But, of course, we’d need time to get provisions in place. In addition, we urged for clarification and guidance on the following issues: l public sector bodies offering payroll services to other publicly linked organisations l linked companies, groups and franchise setups where pay services are operated as joint overheads, and whether this is covered in the exemption l which activities are within scope of the exemptions for payroll software l application processes, legacy processes and digitalisation of these processes. Of course, the CIPP has extended an offer to assist with the creation and dissemination of the guidance on the run up to the implementation date. Next steps The draft legislation is just that – a draft – and we’d expect there to be some small changes off the back of the call for feedback. For you from an operational standpoint, now would be a good time to consider how these proposals impact your business and whether you need to review policies and procedures or sign up for an ASA. We’ve been assured HMRC is equipped to deal with the increase in applications and the registration process. However, the ASA application process is still completed by post, so it may take some time. The CIPP has been in discussions with the policy team in this area from HMRC and will continue to have these conversations. This call for feedback wasn’t a full consultation, and therefore no summary of responses will be published, but we’ll report back as and when we receive updates from Government. n
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| Professional in Payroll, Pensions and Reward |
Issue 115 | November 2025
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