Chapter 20 – PCRT: The standards for tax planning Flashcards
20.1 The standards for tax planning
The standards build on the fundamental principles, especially integrity, professional competence and behaviour, they are not a substitute for the principles. The standards are:
• Client specific – tax planning must be specific to the particular client’s facts and circumstances. Clients must be alerted to the wider risks and the implications of any courses of action.
• Lawful – members must always and with integrity. Tax planning should be based on a realistic assessment of the facts and on a credible view of the law. Members should draw their client’s attention to where the law is materially uncertain.
• Disclosure and transparency – tax advice must not rely for its effectiveness on HMRC having less than the relevant facts. Any disclosure must fairly represent all the relevant facts.
• Advising on tax planning arrangements – members must not create, encourage or promote tax planning arrangements or structures that set out to achieve results that are contrary to the clear intention of Parliament in enacting relevant legislation or are highly artificial or contrived and seek to exploit shortcomings within the relevant legislation
• Professional judgement and appropriate documentation – applying these requirements to particular client advisory situations requires members to exercise professional judgement on a number of matters. Members should keep notes on a timely basis of the rationale for the judgments exercised in seeking to adhere to these requirements
20.2 Client specific
Where risks should be highlighted, the member may either advise on them or identify them as matters om which separate advise should be sought by the client, depending on the scope of the member’s practice and of the engagement. Generic advice poses particular risks. Members are entitled to make reasonable assumptions when giving advice, but assumptions should not be relied upon. Members should consider including in their advice the potential impact of a change in the assumptions made and/or the circumstances which might require specific or updated advice to be obtained.
20.3 Lawful
The requirement to advice clients on material uncertainty in the law applies even if the likelihood of HMRC intervention is low. Clients should be told at the time of the transaction, what to expect HMRC believe on the application of the law. When the likely view of HMRC is uncertain, the member should include this fact as part of their advice. The fact the member may disagree with HMRC is not a breach of these standards. They may reasonably believe HMRC to be wrong, but the client should be aware HMRC has a differing opinion and should be advised of the risks and likely costs incurred in order to determine the dispute.
20.4 Disclosure and transparency
Disclosure should be made whenever required by law and fuller disclosure must be recommended to clients wherever it is appropriate given a wider relationship or dialogue with HMRC relevant to that client. What is disclosed is based on a professional judgement considering relevant facts and law specific to the case in question and what the client consents.
20.5 Advising on Tax Planning Arrangements
Where a member has a genuine and reasonable uncertainty to whether particular planning is in breach of this standards, the member should:
• Document the reasoning and evidence sufficiently to demonstrate why they took the view and why it does not breach the standards
• Include in their advice an assessment of uncertainties and risks involved in the planning
• Include in their client advice an assessment of the relevant disclosures that should be made to HMRC in order to enable it
20.6 Professional Judgement and appropriate documentation
Members should keep paperwork so they can identify, support and where appropriate defend the judgements they made in applying these requirements to their work. Where the judgements are reasonable, notes taken on a timely basis are a convincing way of demonstrating compliance with the principles.
