BPT ethics Flashcards
Responsibility for tax returns (4)
The client retains responsibility for the accuracy of a tax return. The accountant
should draw the client’s attention to this.
The accountant should obtain written evidence of the client’s approval of the
return.
At times the accountant may recommend fuller disclosure in a tax return than is
strictly necessary, for example when significant tax planning is involved.
The client should be made aware of the potential issues and implications of
doing this. Fuller disclosure should not be made unless the client gives his/her
permission.
SAO.(4)
Large UK companies (turnover > £200 million and/or balance sheet total > £2 billion in the previous financial year) must appoint a SAO to certify that accounting systems are adequate for tax reporting purposes.
-SAO is required to:
– Certify annually the adequacy of the accounting systems, or
– Specify the nature of any inadequacies.
Penalties apply for non-compliance or the provision of erroneous information.
In each case the penalty is £5,000 and is generally the personal liability of the SAO.
FA2022 introduced additional powers to HMRC in order to further deter tax avoidance. These include: (3)
- A power to secure or freeze a promoter’s assets where proceedings for a penalty have commenced under the DOTAS, POTAS or DASVOIT regime. This is to prevent promoters hiding or dissipating assets.
-HMRC also now have the power to ask a court to close down an entity promoting or enabling avoidance schemes where it can be shown they are not in the public interest, and disqualify their directors as soon as possible.
-Power was provided to allow HMRC to name promoters, their schemes and details of the way they promote avoidance as soon as possible. Individuals will be provided with 30 days’ notice by HMRC that they will be named
Large business required to publish tax strategies
Large’ businesses must publish on the internet their strategies in relation to UK
taxation.
Failure to do so leads to an initial penalty of £7,500 plus further penalties for
continued non-compliance.
A business is classed as being ‘large’ if its turnover is more than £200million
and/or its balance sheet total is more than £2 billion.
In addition, a special measures incentive exists to monitor large businesses
which use aggressive tax planning or refuse to engage with HMRC in a
collaborative way.
Large businesses – notification of uncertain tax treatments
‘Large’ businesses (see above for definition of ‘large’) must notify HMRC on an annual basis where they have used an uncertain tax treatment. A tax treatment is classed as uncertain if either:
– a provision is made in the accounts in relation to it, or
– the tax treatment does not comply with HMRC’s known interpretation.
Notification is only required if the tax advantage is expected to be >£5 million for
a 12 month period.
Enablers of offshore tax evasion will be issued with a penalty. This penalty will
be the higher of:
100% of the potential lost revenue; and
– £3,000.
HMRC have the power to publish information about the enabler if:
– the potential lost revenue exceeds £25,000; or
– there have been at least five penalties in a five-year period.
Criminal finances act 2017 appplies to Uk and o/s companies and partners but not sole traders. For an action to be brought here three stages must be proved:
The criminal evasion of tax.
The facilitation of this evasion by an ‘associated person’. An ‘associated
person’ can be an individual, corporate entity or an employee of a corporate
associated person, carrying out services on behalf of the ‘relevant body’.
The failure of the relevant body to prevent the facilitation.
Intention or knowledge is not required.
There is a statutory defence where at the time of the offence the relevant body had
reasonable prevention procedures in place to prevent tax evasion facilitation offences
or where it is unreasonable to expect such procedures.
When are companys and directors joint and sverably liabl
The rules apply in three cases:
1 The company has entered into tax avoidance arrangements or tax-evasive
conduct and the director in question was responsible for this, or received a
benefit due to it. For a notice to be made here there must be a resulting
tax liability and a serious possibility that this is not paid.
2 A penalty has been levied on the company under certain tax avoidance
provisions (i.e. DOTAS/DASVOIT, POTAS, enablers of offshore tax
evasion) and the individual in question was a director at the time of the
act/omission the penalty relates to. For HMRC to issue a notice here
there must be a serious risk that this penalty is not paid.
3 The individual in question was a director in at least two other companies at
any time in the five years before the joint liability notice was issued and
each of the companies has become subject of an insolvency procedure
leaving outstanding tax liabilities. The rules only apply here if
– at least one of the ‘old’ companies has an outstanding tax liability and
– the total amount of tax liabilities exceeds £10,000 and is more than
50% of the unsecured liabilities of the companies.
Compliance services
If the client has received advice elsewhere on planning arrangements which the
adviser has to enter on the tax return, this is classed as compliance services.
If doing so the accountant is not responsible for advising on the implications of
the arrangements, however they should not include any arrangements which
they do not believe are sustainable.
Follower notices
HMRC may issue a follower notice to a taxpayer with an open enquiry or appeal
if tax arrangements have been shown in a relevant judicial ruling not to give the
asserted tax advantage.
Accelerated payment notices
Requires a taxpayer to pay the tax that is in dispute in four cases.
(i) Issue of a follower notice.
(ii) Tax arrangement disclosable under DOTAS.
(iii) HMRC is taking counteraction under GAAR.
(iv) A company utilises a tax advantage from an arrangement and then
surrenders all or part of this to another group company as group relief.
Promoters of tax avoidance schemes (POTAS)
Promoters who trigger certain threshold conditions can be issued with conduct notices for periods of up to two years. Breaches of conduct notices can lead to penalties of up to £1 million and provide HMRC with certain disclosure rights about the promoter. Clients of a monitored promoter are subject to an extended assessing period of 20 years, if any tax is lost, for failure to pass on the reference number of the promoter.
Ramsay doctrine.(2)
In addition to the GAAR, planning schemes can also be attacked under the Ramsay doctrine whereby a purposive construction to the statutory provisions may be applied and transactions, or elements of transactions, with no commercial purpose or effect may be ignored.
The Ramsay doctrine states that when there is a tax avoidance scheme using a series of steps the effect of the whole series should be looked at in their entirety rather than each individual step on its own
Impact of GAAR advosry panel and what is GAAR
Applies when one of the main purposes of entering into a transaction was obtaining a tax advantage and arrangements are abusive, e.g. profit/income/gain less than economic one, or deduction/losses exceed economiccost.
if succesfully challenge will get an occasion of non complianced which may impact the tax payers ability to bid for certain gov contracts
If unsuccesful the panel determine a reasonable course of action or the promoter will meet the conditions for the POTAS regime (conduct notice issued if think its more serious)
What is base erosion and profit shifting (BEPS)? (3)
Made by organisation for economic cooperation and development (OECD)
A number of the BEPS actions have already been covered by UK tax legislation for a number of years such as: CFC, transfer pricing, DPT, hybrid mismatch
BEPS 2.0 proposes a two-pillar approach:
Pillar one looks at moving away from a country only being able to tax a company if it has a physical presence in that country. Large multinational groups (revenue of > €20 billion and profits > 10%) will have a proportion of their profits reallocated from the country of presence to the company those profits are being generated in.
– Pillar two subjects multinational groups with profits >€750 million to a global minimum tax of at least 15%. For companies paying a tax rate of less than this a top-up tax will need to be calculated.
