Advanced Taxation (UK) · Ethical and professional issues arising from the giving of tax planning advice

Dealing with Errors, Non-compliance and Ceasing to Act

Updated 11 October 2026 · Fact-checked

If you find an error in a client's tax return, you must tell the client and urge correction. If the client refuses, you must not act for them in connection with that matter and should consider whether to cease acting altogether. You must not tell HMRC without permission, unless the law requires it. You must still consider a money laundering report to the MLRO.

Understand Dealing with Errors, Non-compliance and Ceasing to Act

Start with the basic duty. As a tax adviser you owe duties to your client, but you also owe duties to the public interest and to HMRC. You must act with integrity, objectivity, professional competence and due care, and keep client information confidential. Professional Conduct in Relation to Taxation (PCRT) applies these principles to tax work.

Now take an error. Say you discover that a client's return omitted income, or claimed a relief they were not entitled to. You must first tell the client about the error and its consequences. You should explain how to put it right, and the penalty position. Disclosing the error to HMRC voluntarily and promptly usually leads to lower penalties. The client is the one who must correct a return. You cannot correct it for them without their permission.

What if the client refuses? You must not just carry on as if nothing happened. You cannot submit a return you know is wrong. You must not act for the client in connection with that return or matter, and you should consider whether to cease acting for the client altogether. If the error stays uncorrected, you should not continue with that client without first considering the money laundering consequences. You must not tell HMRC about the error without the client's authority, because of confidentiality. However, the duty of confidentiality has limits. Legal obligations such as money laundering reporting may require you to disclose. Where a client knowingly refuses to correct an underpayment, a suspicion of money laundering is effectively established, so you should report to your firm's MLRO. That duty does not depend on the client's consent.

An important distinction is between an innocent error and deliberate evasion. Tax evasion is illegal. It means deliberately giving false information or hiding income to pay less tax. If you suspect or know of evasion, you may have money laundering reporting duties. You would normally report to your firm's nominated officer (MLRO), who decides whether to make a report to the National Crime Agency. You must not tip off the client that a report has been made or is being considered. Tipping off can itself be an offence.

Finally, ceasing to act and professional clearance. If you do cease to act, you should tell the client that you have done so. Where it is permitted and appropriate, you should consider what to say to an incoming adviser. A new adviser should ask the client for permission to contact the existing adviser, to obtain professional clearance. This is a professional requirement under PCRT. Once the client consents, the existing adviser should reply. They need the client's permission to share information. If the client refuses to give permission, the new adviser should decline the appointment unless there are good reasons not to. In the exam, always link your answer to the scenario facts.

Key rules to remember

Error found in a return: Tell client → urge correction → client corrects, or you must not act on the matter and should consider whether to cease acting altogether; You need the client's permission before telling HMRC, unless the law requires disclosure. Whatever the client decides, still consider a report to the MLRO.
Confidentiality override: Disclosure is allowed only with client consent, or where the law requires it, or where professional duty or right allows it; Money laundering reporting is a legal duty that overrides confidentiality.
Suspected evasion or money laundering: Report internally to the MLRO → MLRO decides on report to the NCA → do not tip off; Tipping off is an offence. Do not warn the client about the report.
Professional clearance: New adviser should ask client's permission → writes to existing adviser → existing adviser should reply once the client consents; Clearance is a professional requirement and safeguard under PCRT, not a legal bar to acting. If the client refuses permission, decline the appointment unless there are good reasons not to.
Avoidance versus evasion: Avoidance = legal planning within the law's intent; evasion = illegal, deliberate misstatement or concealment; Evasion is a criminal matter. Unintended error is neither, but must still be corrected.

How to solve Dealing with Errors, Non-compliance and Ceasing to Act questions

Use this method for any question on errors, non-compliance or resigning. Always apply it to the facts given.

1Identify what has happened: an innocent error, a careless error, or possible deliberate evasion. Give the reason from the scenario.
2State your first duty: tell the client promptly about the error, its tax effect and the likely penalty position.
3Advise the client to correct it by disclosing to HMRC, and mention that prompt, unprompted disclosure usually reduces penalties.
4Say what happens if the client refuses: you must not act in connection with that return or matter, and you should consider whether to cease acting for the client altogether. You must not disclose to HMRC without consent unless the law requires it.
5Consider money laundering: report suspicions to the MLRO, do not tip off, and note that this duty applies whatever the client decides and can override confidentiality.
6Explain the steps on ceasing to act: tell the client, deal with the firm's records and fees properly, and handle professional clearance if a new adviser asks.
7Finish with a clear recommendation tied to the scenario, and show professional scepticism and commercial judgement.

Quickest way: Four-point answer frame

When to use it: Use when time is short and the requirement is a short ethics part of the Section A case or a Section B question.

Point 1: Tell the client and urge correction.
Point 2: If refused, do not act on that matter and consider whether to cease acting altogether. No disclosure to HMRC without consent, unless legally required.
Point 3: Check for money laundering whatever the client decides. Report to MLRO, no tipping off.
Point 4: On leaving, inform the client and handle clearance requests with the client's permission.
Add one sentence linking each point to the named client and facts.

Common mistakes in Dealing with Errors, Non-compliance and Ceasing to Act

Saying the adviser must report the error straight to HMRC.
Students forget that confidentiality is a core principle and that the client controls the correction.
Fix: Say you need the client's permission. Disclose without it only where the law requires, such as money laundering rules.
Saying the adviser can carry on acting and just ignore the error, or can keep the client once they have refused to correct it.
Students focus on keeping the client and on fees.
Fix: State that you must not act in connection with the incorrect return or matter, and that you should consider whether to cease acting for the client altogether. Add that you should not continue with the client without considering the money laundering consequences.
Telling the client that a money laundering report has been made.
Students think honesty with the client is always best.
Fix: Explain that tipping off is an offence. Report to the MLRO and do not alert the client.
Treating every error as evasion.
Students jump to the most serious outcome.
Fix: Separate honest mistakes from deliberate acts. Use the facts to decide, and say what extra information you would need.
Confusing professional clearance with a legal requirement or with consent to disclose.
The term sounds formal and official.
Fix: Explain that it is a professional requirement, not a legal bar to acting. The new adviser should ask the client's consent to contact the old adviser, who needs consent to reply.
Giving only general ethics points without using the scenario.
Students recall the rules and skip the application.
Fix: Name the client, the income or relief involved, and the likely consequence. This earns professional skills marks.

Worked examples

Example 1

You are a tax adviser. While preparing a client's current-year return, you find that the prior-year return omitted rental income of £6,000. The client says the omission was an oversight but refuses to tell HMRC because the amount is small. Explain what you should do.

Show the solution

Identify the nature of the issue: the client says it was an oversight, so it appears to be an error and not deliberate evasion. You still need to be sceptical because the client now knowingly refuses to correct it.
Tell the client that the income is taxable and that the earlier return is wrong. Explain that the tax must be paid, and that interest and a penalty may apply.
Advise the client to disclose to HMRC promptly. Explain that telling HMRC before they discover it usually reduces the penalty.
If the client still refuses, you must not act for the client in connection with that return or the matter, and you should consider whether to cease acting for the client altogether.
Do not disclose to HMRC without consent, because of confidentiality. Because the client knowingly refuses to correct an underpayment, keeping the benefit of the unpaid tax can amount to criminal property. You should report to the MLRO, without tipping off the client.
Conclude: you must not act on the matter. If the error is still not corrected, you should not continue with this client without considering the money laundering consequences, and you should consider whether to cease acting altogether.

Answer: Tell the client, urge prompt disclosure, and do not act in connection with the matter if the client will not correct it, considering whether to cease acting for the client altogether. Do not tell HMRC without consent unless the law requires it. Because the client knowingly refuses to correct an underpayment, report to the MLRO, without tipping off.

Example 2

A new client, Ms Patel, asks you to take over her tax affairs from another firm, Brown & Co. She says she does not want you to contact them. Explain what you should do.

Show the solution

Explain that you must check whether you can ethically accept the engagement. This includes confirming that taking it on is consistent with the fundamental principles.
You should ask Ms Patel for permission to contact Brown & Co. Explain that you need this to obtain professional clearance, which is a professional requirement under PCRT.
If she agrees, write to Brown & Co. and ask whether there are any professional reasons why you should not accept the work. Brown & Co. need her consent to reply and should reply once she consents.
If she refuses permission, you should decline the appointment unless there are good reasons not to. Refusal may suggest there is something she does not want you to find out, such as unresolved errors or non-compliance.
Do not start work until the clearance position is settled. Also complete client due diligence for anti-money laundering purposes.
Once appointed, tell the client in your engagement letter what you are responsible for and what she must provide.

Answer: Ask for Ms Patel's consent to contact Brown & Co. and seek professional clearance. If she refuses, decline the appointment unless there are good reasons not to, because refusal raises concerns. Complete client due diligence and agree the engagement terms before you start.

Exam tips

Match the response to the facts. Decide whether it is innocent error, careless error or suspected evasion, and say why.
Always say you need client consent before disclosing to HMRC, and then name the exceptions where the law requires disclosure.
Mention money laundering and tipping off whenever the scenario hints at deliberate non-compliance.
Write for the client or partner who asked. Use a clear recommendation and a short action list to earn professional skills marks.
Keep ethics answers short and structured. Use one line per point, each linked to a fact from the scenario.

Practice questions from Ethical and professional issues arising from the giving of tax planning advice

Dealing with Errors, Non-compliance and Ceasing to Act: frequently asked questions

What should I do if a client refuses to correct an error in their tax return?

Explain the consequences and urge correction. If the client still refuses, you must not act for them in connection with that return or matter, and you should consider whether to cease acting for them altogether. Do not continue with the client without considering the money laundering consequences. You should not tell HMRC without consent unless the law requires it, but where the client knowingly refuses to correct an underpayment you should report to the MLRO, without tipping off.

Can a tax adviser tell HMRC about a client's error without permission?

Generally no, because of the duty of confidentiality. The exceptions are where the law requires disclosure, for example money laundering reporting. Otherwise you need the client's consent.

What is professional clearance in ACCA ATX?

It is the professional requirement that a new adviser should ask the client's permission to contact the existing adviser before accepting work. Once the client consents, the existing adviser should reply and say whether there is any professional reason not to accept. If the client refuses permission, the new adviser should decline the appointment unless there are good reasons not to.

What is tipping off and why does it matter?

Tipping off means alerting a client that a money laundering report has been made or is being considered, in a way that could prejudice an investigation. It can be an offence. In the exam, say you report internally to the MLRO and do not discuss the report with the client.