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

Brightwater Ltd's tax adviser finds that the company deliberately omitted £200,000 of sales from its corporation tax return, on the instruction of its finance director. The board refuses to correct it. Which combination of actions is most appropriate for the adviser?

The adviser should stop acting and consider reporting a suspicion of money laundering to the National Crime Agency, since deliberate omission is criminal evasion. The adviser must avoid tipping off the client about the report. Amending quietly or telling third parties would breach duties.

  1. ACease to act, consider a suspicious activity report to the National Crime Agency under money laundering legislation, and avoid tipping off the clientCorrect
  2. BContinue to act but amend the return quietly without telling the board
  3. CReport to HMRC directly, informing the board in advance so that it can respond
  4. DCease to act and inform the company's competitors of the reasons

Explanation

Deliberate under-declaration is tax evasion, a criminal offence, so the funds saved are criminal property. The adviser should cease to act and make an internal report or SAR through the MLRO or directly to the NCA. Tipping off is an offence, so the client must not be told about a report. Informing HMRC directly with advance notice to the board risks tipping off, and quiet amendment breaches confidentiality.

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