Ethics

Question 1

Fundamental principles (OPPIC)

Answer 1

OPPIC

Objectivity
Professional competence and due care
professional behavior
Integrity
Confidentiality

Question 2

Conflict of interest Safeguards (NORS)

Answer 2

• Notify relevant parties
• Obtain consent
• Separate engagement teams
• Regular review of safeguards

Question 3

Tax planning Threats

Answer 3

Threat to “professional competence and due care”

• Legal recommendations
• must understand the difference between tax evasion and tax planning

Question 4

Prospective client threats

Answer 4

Threats to Integrity and professional competence and due care

• Threats to integrity if associated with a client with questionable tax history
• Threats to professional competence if the team doesn’t have the necessary skills

Question 5

Steps when taking on a new client

Answer 5

• Contact existing accountants to discuss matters to be aware of
• Subject to client permission, obtain prior info from old accountants.
• ID check
• Money laundering checks

Question 6

Tax evasion threats

Answer 6

Threats to “Integrity and professional behaviour”

• Consider continuing working if the client fails to provide info
• Advise client to make full disclosure to HMRC
• Explain the seriousness of the client’s actions
• Discuss with the money laundering officer

Question 7

HMRC errors in clients favor threats

Answer 7

Threats to “integrity”

Should tell them to refund the excess to HMRC.

If refused, consider continuing to work for them. If so, notify HMRC.

Question 8

Money laundering definition

Answer 8

The process by which criminals attempt to conceal the true origin and ownership of the proceeds of their criminal activity. This can include tax evasion.

Question 9

Client identification procedures

Answer 9

Individual: obtain independent info such as passport AND proof of address

Company: obtain proof of incorporation by identifying the primary address. Identify shareholders and those instructing you on behalf of the company.

Question 10

Tax avoidance schemes

Answer 10

A tax advantage is defined as a relief or increased relief from tax, repayment or increased repayment of tax, avoidance or reduction of a charge to tax.

Promoters of TAS have disclosure obligations.

Fail to comply with a disclosure: £600 a day running from the failure date to the day disclosure occurred. Where disclosure notice issued, but not complied within 10 days, the max daily penalty is £5000.

Question 11

VAT avoidance schemes

Answer 11

Promoters of VAT avoidance schemes also have disclosure obligations.

Penalties for failure to disclose include initial penalty of £600 per day, but a higher penalty of up to £1m may be set in some circumstances.

Question 12

Serial tax avoidance

Answer 12

Taxpayers who use more than one tax avoidance scheme which has been defeated on or after 6.07.2017 may be classed as serial tax avoiders.

Question 13

A defeated scheme:

Answer 13

The taxpayer has reached an agreement with HMRC so tax adv not available

HMRC has obtained favourable court or tribunal rulings.

Tax avoiders will be issued with a serial tax avoidance warning which has effect for 5 years. This requires them to submit extra info annually.

Question 14

Sanctions against serial tax avoiders

Answer 14

• Penalities if further schemes are entered into
• Publically named as a serial tax avoided
• Restriction on direct tax relief up to 3 years

Question 15

GAAR (General anti-abuse rule)

Answer 15

Aim to deter taxpayers from entering abusive schemes.

Examples of abusive arrangements:
- Significantly less income, profits or gains
- Significantly greater deductions or losses
- A claim for the repayment or crediting of tax (including foreign tax) that has not been, and is unlikely to be paid

The penalty is equal to 60% of the tax advantage gained.