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Tax Compliance > Chapter 1 &2 > Flashcards

Chapter 1 &2 Flashcards

1
Q

What are the 5 fundamental principles

A

Integrity
Objectivity
Professional behavior
Professional confidence and due care
Confidentiality

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2
Q

What are the 5 threats to the fundamental principles

A

Self interest
Self review
Intimidation
Familiarity
Advocacy

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3
Q

What are the 5 standards for tax planning

A

Client specific
Lawful
Disclosure and transparency
Advising on tax planning arrangements
Professional judgement and appropriate documentation

CLAPD

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4
Q

What 10 factors should be considered in conflict resolution

A

Relevant facts
Relevant parties
Ethical issues involved
Fundamental principles related to the matter in question
Established internal procedures
Alternative courses of action
Seek professional advice
Phone Icaew helpline
Ask colleagues
Withdraw from client

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5
Q

What are the 3 instances an auditor may disclose confidential information

A

If it required by law
Permitted by law and authorized by the client or employer
Professional duty or right to disclose

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6
Q

What are the 3 actions if a threat to conflict of interest arises

A

Notify the client or other relevant parties of the conflict

Seeking consent of the relevant parties to act

If consent refused, cease to act for one of the parties

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7
Q

What 3 safeguards can you put in place to prevent conflict of interest

A

Use of separate teams

Information barriers plus clear guidelines for teams

Use of confidentiality agreements

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8
Q

What are the 3 steps when accepting a new client

A

1) confirmation of clients identity and business interests

2) Consider threats to the fundamental principles

3) issuance of an engagement letter

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9
Q

What should a tax engagement letter detail (4)

A

Scope of the engagement
Accountants and clients responsibility
Authority to disclose to HMRC
Responsibility of client for the accuracy of the returns (evidenced by signature)

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10
Q

What is the minimum amount of PII for a qualified member of ICAEW to have?

A

If gross fee income less than 600,000 then 2.5* gross fee income (minimum 100,000)

If gross fee income larger than or equal to 600,000 then minimum of 1.5 million

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11
Q

How long should a member ceasing to be in public practice ensure PII cover remains in place?
And what is the recommended timeframe to have the cover

A

2 years

6 years

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12
Q

What 5 things does the collection and processing of data need to comply with GDPR regulations

A

Individuals must opt in
Privacy notices must be clear
Data must not be retained longer than necessary
Compliance monitored by Information Comissioners office (ICO)
Data protection officer (DPO) must be appointed by an organization handling data and they must notify the ICO to be entered onto register of data controllers

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13
Q

What 5 precautions can you take to prevent unauthorized access to data

A

Passwords kept safe and changed regularly

IT equipment kept physically secure

Unusual activity on clients HMRC account reported easily

Awareness of how to deal with phishing emails

Change passwords regularly

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14
Q

How must you deal with a breach in GDPR and what are the consequences

A

Report to the ICO within 72 hours

Tiered fines up to 4% of annual global turnover (or €20 million if higher)

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15
Q

What steps to take if a client fails to provide info leading to underpayment of tax (6)

A

Advise client to inform HMRC or request consent to do so on their behalf

Explain consequences of failure to disclose

If client refuses to operate, resign from position as their advisor and inform HMRC of resignation but do not tell them of reasons

Consider need to submit a SAR to the NCA

Keep a written record of any discussions

Check the engagement letter for authority to act

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16
Q

Who should an accountant report suspicion of money laundering (2)

What happens if you do not have reasonable grounds for the suspicion

A

To the MLRO internally or directly to the NCA in the form of a SAR

The accountant can be open to action for a breach in confidentiality

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17
Q

What are the penalties for:
Money laundering
Failing to disclose money laundering
Tipping off

A

Up to 14 years

Up to 5 years

Up to 2 years

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18
Q

What are the 4 defenses against a failure to report

A

Employee has no suspicion of money laundering and hasn’t received AML training

Money laundering occurring outside UK in a country where it is legal

Knowledge or suspicion of money laundering came in privileged circumstances

Where there is a reasonable excuse

19
Q

What are the 8 money laundering procedures firms should follow

A

Register with appropriate supervisory authority (ICAEW)

Appoint MLRO and implement internal procedures

Train staff on awareness of legislation, reporting suspicions, identify clients

Establish appropriate internal procedures

Carry out customer due diligence

Verify identity of new clients

Report suspicions to NCA using a SAR

Records of client identification maintained for 5 years after termination of client relationship. Records of all transactions also need to be maintained for 5 years

20
Q

What are the bands for the economic crime levy

A

Small: revenue less than 10.2m = exempt

Medium: Rev 10.2m- 36m = £10,000

Large: rev 36m - 1b = £36,000

Very large: rev more than 1b = £250,000

21
Q

6 prevention procedures supposed to be put in place to mitigate risk of tax evasion

A

1) undertaking risk assessment to identify risks and potential gaps in existing control environment

2) introduce necessary changes to ensure robust procedures are in place to prevent tax evasion

3) secure top level commitment from BOD about the need to respond to offenses

4) perform due diligence

5) communicating offences, including training on tax evasion and the offences

6) monitoring and reviewing the procedures

22
Q

If a gift to a child is over what amount, it must be tested as income of the parent

A

£100

23
Q

What are the 4 most important exemptions from income tax

A

Interest on national savings certificates

Income (Int or Div) from ISAs

Betting, competition and premium bond winnings

Some social security benefits eg child benefit

24
Q

What is net income

A

Total chargeable income before deducting the personal income

25
Q

What is taxable income

A

Net income after deduction of personal allowance

26
Q

How does the personal allowance reduce

A

Reduces by £1 for every £2 of persons income that is over £100,000

27
Q

What is adjusted net income

A

Net income less gross personal pension contributions and gross gift aid contributions

28
Q

What is the starting rate

A

0% applies to savings income within the first 5000 of taxable income

29
Q

What is the savings nil rate band

A

1000 basic tax payers

500 higher rate tax payers

USES UP THE BAND

30
Q

What is the div NRB

A

First 2000 div income is 0%

31
Q

What are the percentages at which divs are taxed

A

Basic: 8.75%

Higher: 33.75%

Additional: 39.35%

32
Q

How does gift aid help a tax payer

A

Taxpayer extends the basic rate band by the gross donation ( add the gross donation to the basic and higher rate band limits

33
Q

What happens if you gift an asset to charity

A

Deduction given vs total income

Value of deduction= MV of shares + cost of disposal - consid paid by charity (if not given for free)

34
Q

What is the blind persons allowance

A

Increases PA by 2600 and can be transferred to spouse/ civil partner

35
Q

What is the marriage allowance

A

Can transfer £1260 of PA to spouse or civil partner. It is taken off the income tax of the recipient at the basic rate

Both must be basic rate tax payers

36
Q

What are the child benefit allowances

At what point does the child benefit tax charge begin

A

1134 for first child then 751 per child after that

Anyone earning over 50,000

37
Q

When are interest payments on loans taken out by taxpayer deductible from their total income

A

When they are business related

38
Q

What 5 safeguards to IcAEw accountants give to clients in relation to their work

A

CPD

ICAEW professional standards

Regulatory monitoring

ICAEW complaints procedure

Members hold PII insurance

39
Q

Define tax evasion

What are the two ways it can be done

A

The deliberate intention to mislead the HMRC

Suppressing information or providing false information

40
Q

What are the 2 fundamental principles threatened when you lie on a CV

A

Integrity and professional behavior

41
Q

Define tax planning

A

Using tax relief for the purpose for which they were intended

42
Q

Define tax avoidance

A

Bending tax rules to get advantages not intended by parliament

43
Q

How might the HMRC still crack down on tax avoidance

A

GAAR can be used if abusive avoidance - not a reasonable course of action/ artificial steps

Tax Compliance (13 decks)

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