Mark Lee urges accountants to read the latest professional guidance which contains new standards relating to tax planning advice.
Seven accounting and tax bodies have just published an updated version of Professional Conduct in Relation to Taxation (PCRT). Its content warrants your attention even if you’re not a member of any of the seven bodies concerned (AAT, ATT, ACCA, CIOT, ICAEW, ICAS and STEP).
The PCRT is intended to assist and support accountants and tax advisers in applying their fundamental ethical principles to tax-specific situations; especially those concerning their relationship with clients and with the Revenue authorities.
It has long contained helpful guidance as to the approved professional way to handle difficult situations. These include client complaints and challenges from HMRC. For example PCRT explains what accountants should do:
- If clients are unwilling to make full disclosure to HMRC
- If clients receive requests for information from HMRC, explaining the pros and cons of alternative responses, depending upon whether the request was informal or statutory in nature
- If they become aware of any irregularities or errors whether made by the client, themselves, HMRC or anyone else
In setting out how to deal with such matters PCRT also imposes obligations on members to follow a professional approach when advising on tax matters. In this respect PCRT is an extension of each of the professional bodies' membership handbooks.
What makes PCRT different is that it is jointly published and updated by seven professional bodies. This means there is only one generally agreed guide as to what constitutes professional and ethical behaviour when it comes to tax matters in the UK.
Updates to the PCRT are discussed by a pan-institute group that has to obtain agreement from each of the professional bodies, consider feedback, and resolve disagreements. I used to sit on that group on behalf of ICAEW. It can take well over a year before updates are eventually agreed by all the constituent bodies.
I mention all this to make clear that the updates have to achieve a consensus across all of the members, councils and staff involved in the process on behalf of each of the seven professional bodies. I recall the process was rarely straightforward as vested interests often became apparent.
Each update generates complaints and concerns from some members of the professional bodies. Most such feedback comes from those who were unaware of the guide’s history and how it has evolved and improved over the years.
The PCRT has long stated that each member:
- "...must carry out his work with a proper regard for the technical and professional standards expected
- In particular, a member must not undertake professional work which he is not competent to perform unless he obtains appropriate assistance from a suitably qualified specialist
- A member who is giving what he believes to be a significant opinion to a client should consider obtaining a second opinion to support the advice"
If you give duff advice and it becomes apparent that you ignored those obligations, you could well be subject to allegations of negligence, and potentially disciplinary action by your professional body.
I have been reminding accountants of these points for years in my talks on how to avoid professional negligence claims. I established the Tax Advice Network to provide general practitioners with access to suitably qualified independent tax specialists who can provide those second opinions.
The latest version of the PCRT contains one fundamental change - an agreed response to HM Treasury’s demands that the profession should take action to tackle the creation and promotion of tax avoidance schemes, and address the integrity of those who devise and promote ‘abusive’ tax avoidance schemes.
I have seen some concerns expressed that the new statement in the PCRT will prevent accountants giving clients advice on tax planning. This seems unlikely.
I have spoken to many tax specialists and they are unconcerned by the latest changes to PCRT. One high profile and well respected general practitioner, was quite emphatic. He told me that nothing in the new guidance would have any impact on the advice he has been giving clients over the years nor on the advice he will be giving in future.
The latest version of PCRT adds five new standards for tax planning to strengthen the five fundamental principles (integrity, objectivity, professional competence and due care, confidentiality and professional behaviour) that have formed the core of the guidance for many years.
The guide then includes some detailed guidance on the boundary between tax planning and tax avoidance. Paragraph 2.29 says:
“Members must not create, encourage or promote tax planning arrangements or structures that i) set out to achieve results that are contrary to the clear intention of Parliament in enacting relevant legislation and/or ii) are highly artificial or highly contrived and seek to exploit shortcomings within the relevant legislation”.
We all know that the ‘clear intention of Parliament’ isn’t always obvious when new tax laws are enacted. But the second strand of the new prohibition is clearly unambiguous in it’s focus. This also reflects the public mood and is presumably intended to reduce the legitimacy of criticisms that it is ‘accountants and tax advisers’ that are helping rich people and big businesses to avoid paying the ‘fair amount of tax’.
The new guidance also advises tax practitioners to draw clients' attention to where the law is materially uncertain or where HMRC are known to take a different view of the law.
Each version of the PCRT has been endorsed by HMRC as providing an acceptable basis for dealings between tax advisers and HMRC.
Will the latest guidance mean you have to do anything differently?
About Mark Lee
These days Mark Lee focuses his business actiities on two key activities:
1 - He loves being engaged to speak on stage to audiences of accountants in all size of firms. His latest keynopte talk is: The rise of Robo-Accountants - and how to beat them. He is an accountancy focused speaker, futurist and influencer with a positive reputation for entertaining, engaging and enthusing his audiences.
2 - He loves supporting savvy sole practitioners who want more out of their practice. More clients, more money, more time, more satisfaction - or everything!
An accountant by profession, Mark moved away from the provision of professional advice in 2006. He is now a professional speaker, mentor, author and debunker.
Mark is passionate about helping accountants generally so is a keen blogger and commentator in the accounting and tax press. He has been consultant practice editor of AccountingWEB and has written hudnreds of articles here that have been viewed over a million times.
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Mark no longer gives tax advice despite being a past Chairman of the Chartered Accountants’ Tax Faculty. He is however Chairman of the Tax Advice Network - the UK's highest ranked lead generation website for tax advisers and accountants. The network also publishes a weekly practical tax update for accountants in general practice and full tax support, on demand too. You can also use it as a lead generation resource for local people seeking tax advice from an accountant.