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

During a review of a client's self-assessment return, an adviser finds the client omitted £40,000 of rental income in a prior year. The client refuses to tell HMRC. Which action is consistent with ACCA and professional conduct in tax (PCRT) guidance?

The adviser should tell the client that the error must be corrected, and that the adviser cannot continue to act if it is not. The adviser must also consider money laundering reporting obligations. Direct disclosure to HMRC without consent or legal duty would breach confidentiality.

  1. AReport the omission directly to HMRC to protect the adviser's own position
  2. BIgnore it, since the error relates to a prior year
  3. CTell the client the adviser cannot act if the error is not corrected, and consider the adviser's money laundering reporting obligationsCorrect
  4. DAmend the return privately without telling the client

Explanation

The adviser must urge the client to disclose, explain the consequences, and cease to act if the client refuses. Since the omission suggests criminal property (tax evasion proceeds), the adviser must also consider an internal report to the MLRO or a suspicious activity report. Reporting to HMRC directly without consent or a legal duty would breach confidentiality.

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