ACCA Strategic Professional · Advanced Taxation (UK) · Ethical and professional issues arising from the giving of tax planning advice
Priya, a tax manager, acts for Kestrel Ltd and also for its managing director, Mr Hale, personally. Kestrel Ltd is considering paying Mr Hale a bonus rather than a dividend, and the tax outcomes for the company and Mr Hale pull in opposite directions. Which course of action is most consistent with the ACCA Code of Ethics?
The adviser should identify the conflict, disclose it to both clients and apply safeguards such as separate engagement teams and confidentiality arrangements. If the threat cannot be reduced to an acceptable level, the firm should decline or withdraw from one engagement. Silently favouring one client or ignoring the conflict breaches objectivity.
- AAdvise Mr Hale only, since he controls the company and the firm's fee is mainly from him
- BIdentify the conflict of interest, disclose it to both clients and apply safeguards, or decline to act for one if the conflict cannot be managedCorrect
- CAdvise both clients without disclosure because tax advice is always objective
- DResign from both clients immediately without telling either of them the reason
Explanation
A conflict of interest threatens objectivity. The Code requires it to be identified, disclosed and addressed by safeguards such as separate teams, or withdrawal from an engagement if safeguards are insufficient. Advising one party only or hiding the conflict ignores the threat.
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