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Busy Practitioner by Mark McLaughlin ATII TEP

Some useful practice guidelines for tax advisers are reviewed by Mark McLaughlin ATII ATT TEPThe Chartered Institute of Taxation and The Association of Taxation Technicians have published very useful practice guidelines for member advisers entitled Standards for the Provision of Taxation Services. These are directed primarily towards self-assessment tax returns and apply to dealings with the UK tax authorities. Some helpful and important points are raised, including the following.

Know your client

For new clients, this includes carrying out identity checks and considering taking references from previous advisers regarding the client’s suitability. Such checks are necessary to help comply with the Money Laundering Regulations.

Tax return filing positions

A ‘position’ is broadly a representation of the facts on the tax return. The adviser should ensure he is satisfied that there is a realistic possibility of a position being sustained if challenged by the tax authorities. If the position is tenable, the adviser should advise the taxpayer as to disclosure and the associated risks.

Procedural aspects of preparing returns

An adviser should be able to rely on tax return information provided by the taxpayer or third parties, unless it appears to be incorrect, incomplete or inconsistent.

Reference should be made to prior year tax returns whenever feasible.

Use of estimates

The disclosure of estimates should be consistent with the Revenue’s self-assessment procedures, and the presentation of estimates in tax returns must not give a misleading impression of greater accuracy than exists.

Departure from a previously agreed tax return filing position

In some cases, a departure from the same agreed tax treatment (e.g. based on an Inland Revenue ruling or a Court decision regarding a prior year return of the taxpayer) could be considered justifiable for later years in certain circumstances (e.g. if additional information becomes available).

Knowledge of an error: return preparation

The adviser should promptly recommend to the taxpayer that errors be corrected upon discovery, although it is ultimately the taxpayer’s responsibility to decide whether to correct the error. If the taxpayer does not act on the recommendation the adviser should consider his position, and also consider taking legal advice.

Knowledge of an error: administrative proceedings

If an error is discovered during ‘administrative proceedings’ (e.g. a self-assessment tax return enquiry) and the taxpayer agrees to disclose it, that error should be disclosed without undue delay, and in any event before the enquiry is concluded.

Form and content of advice to taxpayers

An adviser should consider the recipient, purpose and scope of advice before proceeding. An engagement letter should be prepared and agreed, confirming the taxpayer’s instructions and the relevant terms of business advice. The most appropriate form of advice (i.e. oral or written) should also be considered.

Practitioners who are CIOT or ATT members would be well advised to obtain and read the full standards. Members of other professional bodies will doubtless have their own guidelines. In any event, practitioners should be fully aware of all the relevant issues in undertaking tax work on behalf of clients.

Key dates

30 September 2003

Tax returns for 2002/03 must be submitted by this date (or within two months of a notice to deliver the return, if later) to guarantee that the Inland Revenue will calculate the taxpayer’s self-assessment liabilities in good time. This is also the submission deadline for taxpayers who would like the Revenue to collect tax underpayments of less than £2,000 by adjusting future pay as you earn tax codes (this deadline is extended to 30 December 2003 for tax returns filed over the internet).

5 October 2003

Taxpayers who have not already received a 2002/03 tax return (or a notice to file) must notify the Inland Revenue of any income tax or capital gains tax liabilities for that year by 5 October 2003. However, a late notification penalty can still be avoided if this deadline is missed, by ensuring that all of the tax is paid by 31 January 2004, in accordance with TMA 1970, s 7(8).

19 October 2003

Employers with a pay as you earn settlement agreement (known as a ‘PSA’) for 2002/03 must pay their tax liability under the PSA to the Revenue by 19 October 2003 (SI 1993 No 744, Regulation 80G(2)). This is also the normal due date for payment of Class 1B National Insurance contributions, which are due if the PSA was agreed before the due date for Class 1 or Class 1A contributions on expenses or benefits subject to the agreement (see SI 2001 No 1004, Regulation 13(1), and the Revenue’s National Insurance Manual, para 18110).