Chapter 1 &2 Flashcards
What are the 5 fundamental principles
Integrity
Objectivity
Professional behavior
Professional confidence and due care
Confidentiality
What are the 5 threats to the fundamental principles
Self interest
Self review
Intimidation
Familiarity
Advocacy
What are the 5 standards for tax planning
Client specific
Lawful
Disclosure and transparency
Advising on tax planning arrangements
Professional judgement and appropriate documentation
CLAPD
What 10 factors should be considered in conflict resolution
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
What are the 3 instances an auditor may disclose confidential information
If it required by law
Permitted by law and authorized by the client or employer
Professional duty or right to disclose
What are the 3 actions if a threat to conflict of interest arises
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
What 3 safeguards can you put in place to prevent conflict of interest
Use of separate teams
Information barriers plus clear guidelines for teams
Use of confidentiality agreements
What are the 3 steps when accepting a new client
1) confirmation of clients identity and business interests
2) Consider threats to the fundamental principles
3) issuance of an engagement letter
What should a tax engagement letter detail (4)
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)
What is the minimum amount of PII for a qualified member of ICAEW to have?
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
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
2 years
6 years
What 5 things does the collection and processing of data need to comply with GDPR regulations
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
What 5 precautions can you take to prevent unauthorized access to data
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
How must you deal with a breach in GDPR and what are the consequences
Report to the ICO within 72 hours
Tiered fines up to 4% of annual global turnover (or €20 million if higher)
What steps to take if a client fails to provide info leading to underpayment of tax (6)
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
Who should an accountant report suspicion of money laundering (2)
What happens if you do not have reasonable grounds for the suspicion
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
What are the penalties for:
Money laundering
Failing to disclose money laundering
Tipping off
Up to 14 years
Up to 5 years
Up to 2 years
What are the 4 defenses against a failure to report
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
What are the 8 money laundering procedures firms should follow
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
What are the bands for the economic crime levy
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
6 prevention procedures supposed to be put in place to mitigate risk of tax evasion
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
If a gift to a child is over what amount, it must be tested as income of the parent
£100
What are the 4 most important exemptions from income tax
Interest on national savings certificates
Income (Int or Div) from ISAs
Betting, competition and premium bond winnings
Some social security benefits eg child benefit
What is net income
Total chargeable income before deducting the personal income
What is taxable income
Net income after deduction of personal allowance
How does the personal allowance reduce
Reduces by £1 for every £2 of persons income that is over £100,000
What is adjusted net income
Net income less gross personal pension contributions and gross gift aid contributions
What is the starting rate
0% applies to savings income within the first 5000 of taxable income
What is the savings nil rate band
1000 basic tax payers
500 higher rate tax payers
USES UP THE BAND
What is the div NRB
First 2000 div income is 0%
What are the percentages at which divs are taxed
Basic: 8.75%
Higher: 33.75%
Additional: 39.35%
How does gift aid help a tax payer
Taxpayer extends the basic rate band by the gross donation ( add the gross donation to the basic and higher rate band limits
What happens if you gift an asset to charity
Deduction given vs total income
Value of deduction= MV of shares + cost of disposal - consid paid by charity (if not given for free)
What is the blind persons allowance
Increases PA by 2600 and can be transferred to spouse/ civil partner
What is the marriage allowance
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
What are the child benefit allowances
At what point does the child benefit tax charge begin
1134 for first child then 751 per child after that
Anyone earning over 50,000
When are interest payments on loans taken out by taxpayer deductible from their total income
When they are business related
What 5 safeguards to IcAEw accountants give to clients in relation to their work
CPD
ICAEW professional standards
Regulatory monitoring
ICAEW complaints procedure
Members hold PII insurance
Define tax evasion
What are the two ways it can be done
The deliberate intention to mislead the HMRC
Suppressing information or providing false information
What are the 2 fundamental principles threatened when you lie on a CV
Integrity and professional behavior
Define tax planning
Using tax relief for the purpose for which they were intended
Define tax avoidance
Bending tax rules to get advantages not intended by parliament
How might the HMRC still crack down on tax avoidance
GAAR can be used if abusive avoidance - not a reasonable course of action/ artificial steps
