The History and Development of the Tax Profession

How many current tax advisers know that there was once a “Society of Accountants” whose members included rent collectors and manure merchants? It was created partly to provide a professional home for those whose work involved accounting but was deemed inappropriate for membership of the Institute of Chartered Accountants  (which received its Royal Charter in 1880).  Tax advisers were not regarded as quite so far beyond the professional pale, but that was perhaps mainly because at that stage they hardly existed as a discrete professional group.

Professor Jane Frecknall Hughes, a valued friend of our Tax History Group, took us down these and other fascinating historical byways in her address on 14 February in the august setting of the Royal Institution, sharing with us some of her ongoing research as part of a much wider study at the Open University. The slow development of our profession was closely linked to that of taxation itself. Income tax was at first widely regarded as a temporary impost; not until well after the Crimean War did politicians finally accept that it had come to stay. Complaints about its growing complexity (does that sound familiar?) and “inquisitorial” nature soon followed. By 1878, the Accountantmagazine (started four years earlier) was running technical tax correspondence pages, and in 1882 a reader asked whether there existed some simple guide to the tax, only to be told that no reliable one yet existed. By 1895, probably the first comprehensive textbook on the subject, Roger Carter and Adam Murray’s Guide to Income Tax Practice, had filled the gap.

Lectures and training courses for students of taxation had begun as far back as 1890s, but it was the Institute of Taxation (IOT), founded in 1930,  that created the first widely accepted professional qualification in the subject (in 1932, although it would be another 33 years before passing those examinations became a precondition of membership). Specialist firms had also begun before the turn of the century, with the Income Tax Adjustment Agency (1890) followed by the Income Tax Repayment Agency (1901) and another fourteen such businesses by 1914. But the IOT was the first body to attempt to draw together those of diverse backgrounds whose work now centred on the increasingly complex world of taxation. Ronald Staples, the first President, was an Inspector of Taxes turned private practitioner who three years earlier had started Taxationmagazine; another of the founders, Roy Borneman, practised at the Revenue Bar. Two other founding council members were Carter and Murray, the textbook authors of 35 years earlier, both chartered accountants. So taxation practice became a broad church comprising lawyers, accountants, civil servants and those employed in industry and commerce.

Jane also explored the developing and contrasting roles of lawyers and accountants as tax practitioners. In the early part of the 20th century there seemed to be a perception that while lawyers were the natural port of call for advice on land and estate taxation (death and stamp duties), accountants, close to their clients in the supposedly socially inferior worlds of trade and industry, were better at “getting their hands dirty” in preparing accounts and tax returns, and also more proactive in looking for new business and, later, opportunities for legal avoidance. Sometimes the two professions came into conflict over their roles, for example in insolvency, but could form a united front against the perceived upstarts of the IOT, which was frustrated in its earliest attempts to obtain a Royal Charter by accounting and legal bodies’ objections that taxation advice was not a separate profession. And if lawyers might sometimes affect a superior attitude to their role in tax matters, accountants could also deliver a well-aimed snub, as a member of the ICAEW discovered in 1894 when he tried to add “Income Tax Adjustment Agent” to his official accountancy designation; the Institute refused this request, objecting to a member holding himself out as a mere agent, with perhaps a hint that this was as demeaning as the offer of taxation services.

Finally,  Jane drew on the substantial literature on the formation of professions generally, classifying taxation as one of those professions defined by “what you do rather than who you are”-in contrast to the Church or, in some manifestations, the Law. All professions had hitherto been characterised by the need to draw boundaries and keep out the unqualified or undesirable; the IOT, by contrast, never intended to compete with accountants or lawyers, but drew people from both camps, and was aimed at creating a specialist elite rather than merely excluding the ineligible. Eighty years on from its foundation, the CIOT is still faced with the tension between the ideal of a broad fellowship of people from diverse backgrounds, and the public interest, as taxation grows ever more complex, in reducing the public’s exposure to the incompetent or unscrupulous potential adviser.  

Jane’s lecture was a joint event held in conjunction with the CIOT and ATT. Introductions were given by Peter Gravestock, Master of the WCTA, and Anthony Thomas, President of the CIOT, with thanks afterwards by Stuart McKinnon, President of the ATT. Mark Spofforth, a deputy president of the ICAEW and a descendant of another of the IOT’s founders, was also present. All speakers paid tribute to the late John Jeffrey-Cook, Clerk Emeritus of the WCTA until his death last summer, who was to have been a joint speaker at this event, and we were delighted to welcome John’s widow, Gillian, as a guest.

David Williams

February 2012