Are payroll professionals tax advisers?

01 December 2021

One of the biggest things for payroll to come out of Tax Day on 30 November 2021 is confirmation that the government is not proceeding with introducing mandatory Professional Indemnity Insurance (PII) for tax advisers at this time. This follows on from a consultation seeking to address poor behaviour by a small number of tax advisers and raise standards in tax advice.

What does this have to do with payroll?

Tax advice is not defined in law. Payroll professionals, depending on their role, can deliver tax advice. This is particularly prevalent among outsourced payroll services where clients may look to their service provider for advice and recommendations, for example, in implementing salary sacrifice schemes. 

The CIPP responded to the consultation expressing concerns whether introducing PII would achieve the government objective – raising standards in tax advice. The CIPP concluded that many payroll professionals will not be engaged in providing tax advice, however acknowledged there is often a fine line between delivering advice and guidance. We encourage all payrollers to be mindful of this line.

The government has confirmed that it expects to publish a new consultation document next year, which will “test a potential legislative definition of tax advice”. The current response however does conclude that exclusions should be made for accountants and bookkeepers undertaking activities such as payroll.

We’re pleased to see the government has taken a cautious step away from mandatory PII and we will be keeping an eye out for the second consultation. While the response to this consultation acknowledges the need for exceptions, a legislative definition of tax advise could have huge ramifications on how payroll operates. 


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