Latest edition of professional conduct in relation to taxation released
On 1 May 2015, the various professional bodies overseeing accountants and tax advisors (including ICAEW and ACCA) published updated guidance titled “Professional Conduct in Relation to Taxation”(‘the Guidance’). This replaces previous editions which were effective from 24 February 2014 and 4 January 2011 respectively. The Guidance is intended to apply to all members who practise in tax, and has been acknowledged by the Court of Appeal in Mehjoo v Harben Barker (see the previous edition of our Update /news-updates/2014/08/limited-duties-what-tax-advice-does-an-accountant-need-to-give/ ) as “setting the standard” for use by tax advisors in the UK. The applicable guidance which was in force at the time tax advice was given could therefore be relevant if subsequently civil claims are made, or disciplinary proceedings are taken, against a tax advisor.
The Guidance is said to have been reviewed by Counsel and applies to all tax dealings, but specifically recognises the ongoing developments and public concern about aggressive tax avoidance and evasion. In particular it has new measures on DOTAS, POTAS, Accelerated Payment and Follower Notices, and tax planning.
The Guidance applies a number of fundamental, ethical principles to taxation practitioners’ work, including: acting with integrity, maintaining objectivity, conducting work with professional competence and due care, maintaining confidentiality and avoiding bringing the profession into disrepute. Particularly noteworthy aspects of this include: the requirement of members to explain to clients the material risks of tax planning; the need to disclose if the tax advisor is receiving commissions; the importance of taking care not to conduct work beyond the scope of an advisor’s engagement and of making clear in writing limits to the scope of services provided; and the need to ensure that the tax advisor does not undertake work he/she is not competent to perform (unless appropriate assistance is obtained).
Tax Avoidance & Evasion
The Guidance expands on commentary in its previous edition relating to the Government crackdown on aggressive tax avoidance and tax evasion. A distinction is drawn between legitimate tax planning, and aggressive tax avoidance; and the Guidance sets out, amongst other matters, HMRC’s views on the characteristics of a tax avoidance scheme. Accountants and tax advisors should be conscious as to HMRC’s view as they are the body that will challenge a transaction; although the court ultimately decides whether a transaction or scheme falls foul of tax legislation.
Useful, practical assistance is given to tax advisors who undertake various different roles: advising on tax planning arrangements; introducing a client to another’s tax planning arrangement; providing a second opinion on a third party’s tax planning arrangement; and undertaking work on tax returns that include a tax advantage.
The Guidance does not include any specific changes following the publication by HM Treasury and HMRC of the paper “Tackling tax evasion and avoidance” on 19 March 2015. With the election imminent at the time, the Government (and therefore the Government’s views on tackling tax evasion/avoidance) were subject to change. In that paper, the HM Treasury/HMRC confirmed that they were asking the regulatory bodies to take on a greater role in policing and enforcing professional standards in relation to facilitating and promoting tax avoidance. Further discussions are said to have been planned between the Government and professional bodies after the election. We would therefore expect the Guidance to be updated, or supplemental guidance to follow in due course.
When seeking professional indemnity insurance members may be in a more favourable position if they can confirm their compliance with the Guidance, together with their compliance with the separate technical guidance on Engagement Letters for Tax Practitioners (published in February 2013) which is also important (but outside the scope of this article). Compliance with the Guidance should help to reduce the risk of claims being made against tax advisers by their clients.
This information is intended as a general discussion surrounding the topics covered and is for guidance purposes only. It does not constitute legal advice and should not be regarded as a substitute for taking legal advice. DWF is not responsible for any activity undertaken based on this information.