ACCA Strategic Professional · Advanced Taxation (UK) · Ethical and professional issues arising from the giving of tax planning advice
Hartwell LLP advises a UK resident individual, Dev, who holds an overseas bank account. Dev gives the firm full details of undeclared foreign interest from the last five years and asks the firm to keep it confidential and continue only with current-year work. Which statement is correct?
The firm should urge Dev to disclose the undeclared overseas interest to HMRC and cannot continue to act if he refuses. It must also consider its money laundering reporting duties. Confidentiality does not shield known tax irregularities, and UK residents are taxable on worldwide income.
- AThe firm may continue on current-year work only, provided the confidentiality is documented in the engagement letter
- BThe firm must immediately file corrected returns for Dev without his agreement
- CThe firm may rely on confidentiality, because overseas income is outside UK reporting rules
- DThe firm should urge Dev to make a disclosure to HMRC, and cannot continue to act if he refuses, as well as considering its own reporting dutiesCorrect
Explanation
Confidentiality does not protect concealment of tax irregularities. The firm must advise on disclosure and penalties, cannot continue to act if the client will not correct the position, and must consider money laundering reporting. Overseas interest of a UK resident is taxable, so the second option is wrong. Filing without consent breaches confidentiality, and carrying on with only current-year work leaves the adviser complicit.
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