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ACCA Strategic Professional · Advanced Taxation (UK) · Legitimate tax planning measures

Priya, a client, proposes to omit £20,000 of cash rental income from her tax return because 'HMRC will never find out'. She is a client of your firm. What is the most appropriate action for the firm under the ethical and professional guidance applicable to tax advisers?

The firm should advise Priya to disclose the income. If she refuses, it should consider ceasing to act and whether a money laundering report is needed. Preparing a return known to omit income would make the firm party to evasion, and a higher fee does not remove that.

  1. AAdvise her to correct the position by disclosing the income, and if she refuses, consider ceasing to act and whether a money laundering report is requiredCorrect
  2. BPrepare the return as instructed because the client is responsible for the content
  3. CPrepare the return but charge a higher fee to reflect the risk
  4. DReport the matter to HMRC immediately without first speaking to the client

Explanation

Deliberately omitting income is evasion. The adviser must not be party to it, should urge disclosure, and if the client refuses should consider ceasing to act and reporting suspicions under money laundering rules. Preparing the return as instructed would make the firm complicit, and a higher fee does not cure that. Confidentiality limits mean the adviser would not simply report to HMRC without considering the rules and the client conversation.

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