Ethics and Law

Question 1

Fundamental principles

Answer 1

Integrity
Objectivity
Professional competence
Confidentiality
Professional behaviour

Question 2

Threats to fundamental principles

Answer 2

Self-interest
Self-review
Advocacy
Familiarity
Intimidation

Question 3

Standards for tax planning

Answer 3

Client specific
Lawful
Disclosure and transparency
Advising on tax planning arrangements
Professional judgement and appropriate documentation

Question 4

Relevant factors to be considered when initiating a conflict resolution process

Answer 4

Facts
Parties
Ethical issues
Fundamental principles
Established internal procedures
Alternative courses of action

Question 5

Conflict resolution consultations for the accountant

Answer 5

Appropriate colleagues within the firm
Those charged with governance of the organisation (board of directors)
The relevant professional body

Question 6

Last resort in event of an ethical conflict

Answer 6

Refuse to remain associated with the matter creating the conflict
Withdraw from the engagement team / resign from firm

Question 7

When it is appropriate to disclose confidential information

Answer 7

Permitted by law and authorised by the client or employer
Required by law
Professional duty or right to disclose

Question 8

Conflict of interest safeguarding procedures

Answer 8

Notify the client and other relevant parties of the conflict
Seek the consent of the relevant parties to act - cease to act for one of the parties if refused

Question 9

Conflict of interest safeguards if firm continues to act for both parties

Answer 9

Separate teams
Information barriers and clear guidelines
Confidentiality agreements
Regular review of controls

Question 10

HMRC secondment

Answer 10

Secondee serves the interests of HMRC
Steps taken to remove them from any situation where there is scope for a conflict of interest between HMRC and the seconding organisation

Question 11

Steps when accepting a new client

Answer 11

Confirmation of client’s identity
Consideration of threats to the fundamental principles
Issuance of an engagement letter

Question 12

Minimum professional indemnity insurance

Answer 12

When gross income < £600,000
= Higher of 2.5 x gross fee income or £100,000

When gross income > £600,000
= £1.5 million
Remains in place for at least two years after a member ceases to be in public practice, six years recommended

Question 13

Precautions taken to prevent unauthorised access to client data

Answer 13

Passwords changed regularly
IT equipment kept physically secure
Unusual activity on the client’s HMRC online account and phishing emails reported immediately
Breaches reported to the ICO within 3 days
Tiered fines levied of up to €20 million

Question 14

Disclosure and correction in event of client providing misleading information or failing to provide information

Answer 14

Advise client to inform HMRC or request consent to do so on their behalf
Explain the consequences of tax evasion
Resign from position of advisor if client refuses to cooperate and inform HMRC but do not disclose the reason
Consider the need to submit a SAR to the NCA

Question 15

Money laundering

Answer 15

Possessing, dealing with, or concealing the proceeds of crime
Reported to a MLRO in the form of a SAR
Disclosure without reasonable grounds for suspicion could lead to an action for breach of confidentiality

Question 16

Money laundering maximum penalties

Answer 16

14 years for main offence
5 years for failing to disclose
2 years for tipping off

Question 17

Defences against a failure to report money laundering

Answer 17

No suspicion
Inadequate AML training from employer
It occurred outside the UK in a country where it is legal
Knowledge / suspicion came in privileged circumstances

Question 18

Anti-money laundering procedures

Answer 18

New client
- Carry out customer due diligence
- Verify identity and maintain evidence

Disclosure of suspicion
- Don’t tip off (unlimited fine / 2 years)
- MLRO considers if there are reasonable grounds for knowledge / suspicion - if so submit a SAR to the NCA

Data protection
- Maintain records of client identification and transactions for five years after the termination of the relationship
- Consider further training

Question 19

Economic crime Levy

Answer 19

For firms within the anti-money laundering regulated sector
< £10.2 million revenue = exempt
- £36 million = £10,000
- £1 billion = £36,000
> £1 billion = £250,000
Payable by 30 September based on previous year’s revenue

Question 20

Tax planning

Answer 20

Legal tax reduction based on the intended consequence of legislation
eg. pensions / ISAs / relief for R&D spend

Question 21

Tax avoidance

Answer 21

Legal tax reduction involving bending the rules and obtaining a tax advantage not intended by Parliament
eg. certain loss schemes / circular transactions through shell companies

Question 22

Tax evasion

Answer 22

Illegal reduction of tax by seeking to mislead HMRC
Punishable by penalties or criminal prosecution
eg. Failing to notify HMRC of taxable income
Understating income / overstating expenditure

Question 23

General Anti-Abuse Rule signposts
- aims to remove the tax advantages gained from abusive avoidance

Answer 23

Sounds too good to be true
Tax results out of proportion with the commercial / economic risk or activity
Artificial or contrived arrangements (shell companies)
Offshore entities or tax haven countries involved
Secrecy or confidentiality agreements
Arrangement has a scheme registration number assigned by HMRC

Question 24

Prevention procedures to mitigate the risk of tax evasion being facilitated by an employee / associate of the business

Answer 24

Risk assessment to identify gaps in the existing control environment
Performing due diligence
Training