The media spotlight on tax avoidance may have died down, with attention shifting to the examination of audit and corporate failure, but for many commentators, the ethics of the tax profession remains a topic of interest and concern. There is now an expectation, from both the government and the public, that tax work must be ethical.

But what does that mean in practice? ICAEW members have to adhere to the code of ethics in all their work. Core to that are the fundamental principles of integrity, objectivity, professional competence and due care, confidentiality and professional behaviour. Applying those concepts to real-life tax work is where the Professional Conduct in Relation to Taxation (PCRT) guidance comes in.

Developed with ICAEW and six other professional bodies, and endorsed by the tax authorities, PCRT discusses how the fundamental principles apply to a member providing tax services. For example, integrity requires that the member does nothing that could mislead the tax authorities; and objectivity requires that clients are made aware of the material risks of any tax planning, and the basis on which advice is given.

Building on the fundamental principles, since 2017 the PCRT has included some additional tax-specific standards for tax planning (see below). These focus in particular on integrity, professional competence and due care, and professional behaviour. The standards, which have been developed in the context of the UK tax system, supplement the fundamental principles.

ICAEW members are very unlikely to be involved in the kinds of unacceptable tax planning that would be in breach of these standards. In the event that they were, a complaint could be made (including by HMRC) to ICAEW’s professional standards department for investigation.

Misuse of government COVID-19 support schemes

Ethical dilemmas have been front of mind for many when they are faced with potential misuse by clients of government support schemes. These schemes may not appear to be directly linked to a client’s tax affairs but, under Sch 16 to the Finance Act 2020, where a claimant is not entitled to the payments, the amount to which they are not entitled is recovered in full by way of an income tax charge (paid with corporation tax where the recipient was a company).

There is, therefore, a direct link between a support scheme claim made, to which a person had not been entitled, and the tax code. So what is a member supposed to do if they think that a client may have wrongly claimed furlough support or Self-Employment Income Support Scheme grants?

It comes down to a member’s core ethical obligations under the fundamental principles and PCRT:

• The complexity and ever-changing nature of some of these schemes means that many claimants will have made inadvertent errors and may need our assistance in correcting their claims.
• However, there will unfortunately be some instances where people have sought to defraud the schemes. Integrity requires that members cannot be associated with false or misleading information. If you discover that a client has falsified figures or other details in a claim, then you have to insist that they correct it. If they refuse, then a member must take steps to disassociate themself from the misleading information, which may include ceasing to act for that client. The PCRT helpsheet on dealing with errors provides a useful flowchart.
• Confidentiality continues to apply, so reporting the client to HMRC’s fraud line will usually not be an option. Instead, a suspicious activity report may be required to advise the National Crime Agency of the wrongdoing.

ICAEW’s Ethics Advisory helpline is available to help and support those members who find themselves faced with difficult situations such as these (01908 248 250).

Standards for tax planning

The standards explain that any tax advice given to a client must:

• be client specific;
• be lawful – including a realistic interpretation of all relevant facts and legislation;
• not rely on keeping facts from HMRC;
• not set out to achieve results contrary to the clear intention of Parliament;
• not be highly contrived or highly artificial and seek to exploit shortcomings in legislation; and
• exercise professional judgement where needed (and for this to be documented).

About the author

Sophie Wales, Director, ICAEW Tax, Ethics and Law Group