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ACCA Strategic Professional · Advanced Taxation (UK) · Mitigation of tax by numerical analysis and reasoned argument

Mia Chen, a client of your firm, asks you to explain why a written tax planning recommendation should state the assumptions on which it is based. Which statement best reflects good practice in presenting tax planning advice?

Assumptions should be stated in the advice because the conclusions depend on them. The client can then see the basis of the recommendation and recognise when changed facts mean the advice needs to be revisited. Omitting them or hiding them in internal papers weakens the advice.

  1. AAssumptions should be omitted so that the advice is concise and the client is not confused
  2. BAssumptions should be stated because the conclusions depend on them and the client can then judge whether the advice still applies if the facts changeCorrect
  3. CAssumptions are only needed where the advice involves a numerical computation
  4. DAssumptions should be stated only in the working papers kept by the firm and not given to the client

Explanation

Tax advice depends on the facts and law assumed. Stating assumptions lets the client see the basis of the recommendation and tells them when the advice may need revisiting. Leaving them out or keeping them only in internal papers removes that protection, and the need applies to qualitative advice as well as computations.

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