Topic 14-Ethics Flashcards
List the 5 fundamental principles
Objectivity Professional behaviour Professional competence and due care Integrity Confidentiality
What actions matters should be considered before taking on a client?
- Give consideration to the fundamental principles eg I and PCDC
- Consider if become tax advisors creates a threat to our compliance with these.
- If a threat is identified, she should not accept appointment unless can be reduce to acceptable level with safeguards in place
- Assure ourselves the client is not involved in ML
What actions should be completed before taking on a new client?
- Obtain permission from potential client to contact existing firm to ensure that there is nothing in the past which would preclude us from accepting the appointment on ethic ground.
- If Client refuses to give permission, seriously consider refusal to act for them.
- Carry out a review in order to satisfy ourselves that the client is not carrying on any activity which ,ay be regarded as ML
- Issue a letter of engagement - terms of agreement and agreed responsibilities.
What is a conflict of interest?
Where acting for two clients creates a conflict of interest eg, both parties of a divorce, employee and employer, or two parties to a transaction.
How would you manage a conflict of interest?
- It may be acceptable in specific situations with safeguards
1. Obtain permission in writing from all parties and consider making a different member of the firm responsible for each.
2. Consider use of separate teams
3. Ensure that we have clear guidelines to maintain confidentiality.
4. If required, obtain written permission to discuss affairs with the other
5. If it isn’t acceptable must only act for one, or neither.
Set out the points you will make in order to explain the extent to which a client can benefit from the knowledge we have gained from advising other clients.
- We have experience in certain areas (state applicable)
- Able to use general experiences and expertise to benefit new client
- Must not use confidential information
- Confidentially is one of the fundamental principles
- Where we have acquired confidential info - obliged to refrain from using for own advantage or advantage of 3rd party
- Confidentiality applies to current and ex clients
- Professional competency to ensure relevant experience to advise and take due care over that advise
Errors: Client perspective:
Clients has a responsibility to report omission to HMRC and pay the outstanding tax
It will be committing tax evasion, a criminal offense, if it fails to do so.
HMRC will charge client interest on tax which becomes payable.
Errors: Firm perspective
- Investigate how error arose and consider if more?
- Will not retain client if deliberate tax evasion
- Inform the firms MLRO ( could result in criminal proceedings)
- Could not continue to act unless issue disclosed to HMRC
- If we cease to act - notify HMRC - do not give reason.
Explain implication for employer and employee of failure to report profits to HMRC
Employer: as for errors
Employee:
Raise any issues within the company - if refuse to listen seek legal advise.
Inform MLRO
Consider whether to continue employment unless issue disclosed
Consider if issues needs to be disclosed under Public interest disclosure act.
State the purpose of the General Anti Abuse Rule:
Intended to Counteract tax advantages obtained via what would otherwise be legal tax avoidance methods, where the arrangements are considered to be abusive.
For purpose of GAAR, what is a tax advantage?
Increased tax deduction
Reduced tax liabilities
Deferral of tax payments
Advancement of tax repayments,
For purpose of GAAR, what is a tax arrangement?
Arrangement with the main purpose of obtaining a tax advantage.
What is tax evasion?
It’s unlawful, and involves the provision of false information or withholding information in order to evade tax.
What is tax avoidance?
Involves the use of legal methods in order to reduce the amount of tax payable.
When is an arrangement abusive?
Where they cannot be regarded as reasonable course of action
eg where they include contrived steps; or
are intended to take advantage of the short comings of tax legislation.
