Professional Conduct in Relation to Taxation

The Professional Conduct in Relation to Taxation (PCRT) guidance is intended to advise and assist members of the relevant bodies in their professional conduct, particularly when it comes to relationships with clients and HMRC.

The PCRT has been updated and five new standards apply from 1 March 2017. It has been further updated with a new digital structure from 1 March 2019. As a result, some of the 2017 helpsheets have been amended or removed so that they provide guidance to support the fundamental principles and standards that underpin professional conduct, instead of providing commentary about developments in the tax system that are better addressed through other non-PCRT guidance.

The PCRT applies to the following tax and accounting bodies:

• Institute of Chartered Accountants England & Wales (ICAEW)
• Association of Accounting Technicians (AAT)
• Association of Chartered Certified Accountants (ACCA)
• Association of Taxation Technicians (ATT)
• Chartered Institute of Taxation (CIOT)
• Institute of Chartered Accountants of Scotland (ICAS)
• Society of Trust and Estate Practitioners (STEP).

The PCRT sets out:

• The fundamental principles of behaviour that members are expected to follow.
• How these may apply to the day-to-day work of a tax adviser, as well as some more speciality situations

The new 2019 PCRT can be found here.

The latest PCRT:

• Incorporates the same fundamental principles and guidance as the previous versions.
• Also contains new ‘Standards for Tax Planning’ which cover any structure or arrangement that is artificial, contrived, or seeks to exploit loopholes in tax law.

HMRC has set out its 'Standards for Agents' which is aimed at tax agents who are not members of any professional bodies.

What's new?

June 2020: New guidance on PCRT in relation to Research & Development, see R&D tab

June 2024: PCRT bodies make joint statement on tax regulation

The PCRT sets out the fundamental principles of behaviour that members are expected to follow and includes:

• General guidance on how these apply to day-to-day situations.
• Guidance on more specific circumstances.

PCRT: fundamental principles

• Integrity: to be straightforward and honest in all professional and business relationships.
• Objectivity: to not allow bias, conflict of interest or undue influence of others to override professional or business judgements. This includes explaining the risks of tax planning and disclosing incentives/commissions to clients.
• Professional competence and due care: to maintain skill and knowledge at the required level and keep up-to-date with developments in practice, legislation and techniques and to act diligently in accordance with professional standards.
• Confidentiality: to respect the confidentiality of information acquired and not disclose it to third parties without authority unless legally required nor use it for personal advantage.
• Professional behaviour: to comply with relevant laws and regulations and avoid discrediting the profession. This includes in dealings with HMRC and keeping your own tax affairs up to date.

General guidance

The PCRT sets out how these principles may affect the day-to-day work of a tax adviser in the following areas:

Tax returns

A range of examples are provided covering the preparation of tax returns including:

• You are responsible for the accuracy of a return based on the information provided by the client.
• Bear in mind confidentiality when dealing with HMRC and act in good faith.
• The accounting concept of materiality cannot be applied to tax.
• Think carefully about the level of disclosure required in a return.
• Clients should be advised to review tax returns before submitting them.

Tax advice

The guidance covers:

• The distinction between tax evasion, tax planning and tax avoidance.
• The General Anti-Abuse Rule (GAAR) and members’ duties in respect of it.
• Responsibilities when giving tax advice, in particular the required professional competence and due care.
• The different roles of a tax adviser and the technical and practical considerations, including being a primary adviser, introducing another’s planning and providing a second opinion.

Guidance on specific circumstances

The PCRT also advises on the following specific circumstances.

Irregularities

• Clients should be notified of any irregularity in their tax affairs as soon as possible.
• Where a client benefits from an irregularity bear in mind the money laundering rules.
• If a client fails to explain an irregularity you should consider ceasing to act.
• Although as a general principle all irregularities should be corrected, in practice isolated errors with a tax effect of up to £200 do not have to be disclosed to HMRC.
• You have to have the client’s authorisation to disclose an error to HMRC: if they are reluctant advise them of the consequences.
• If they refuse to disclose then you must cease to act and tell HMRC of this (though not the reason). You should also consider Money laundering requirements.

HMRC data requests

• You must comply with statutory requests: if valid they override your duty of confidentiality.
• Disclosure in response to non-statutory/informal requests can only be made with your client’s permission.
• Communications from a tax adviser who is not a lawyer do not attract legal advice privilege, but some similar protections apply in certain circumstances.
• Where you no longer act for the client you still have the same duty of confidentiality.

Voluntary disclosures under disclosure facilities

• Make sure any disclosure will be full and frank, and be alert to the possibility of criminal behaviour.
• Consider the Money laundering rules.

Disclosure of Tax Avoidance Schemes (DOTAS), Follower Notices, Accelerated Payment of Tax and Promoters of Tax Avoidance Schemes (POTAS)

• Be aware of the Disclosure Of Tax Avoidance Schemes (DOTAS), Follower Notice and Accelerated Payment Notice (APN) rules and advise clients of the consequences of failing to comply.
• Put in place instructions, systems and processes to ensure compliance with DOTAS obligations.
• Seek legal advice if you are issued with a conduct notice under Promoters of Tax Avoidance Scheme (POTAS) or are informed you will be.

Tax evasion

• You must never knowingly be involved in evasion, though you can act for a client trying to rectify their affairs.
• Remain vigilant to the possibility of tax evasion, even in what appears to be lawful planning.
• Always consider the Anti-money laundering rules.

HMRC rulings and clearances

• Taxpayers need to ‘put their cards face up on the table’ in order to rely on any ruling or clearance.
• If the facts and circumstances change after a ruling HMRC should be notified.

Other interactions with HMRC

• Respect any request by HMRC for confidentiality.
• You can share confidential information with senior people in their professional body in order to keep it informed.
• Be careful of disclosing confidential client information.

The new PCRT applies from 1 March 2017. It contains a new section setting out ‘Standards for tax planning’.

This updated guidance has been acknowledged by HMRC as an acceptable basis for dealings between members and HMRC.

The standards for tax planning build on the fundamental principles and focus in particular on integrity, professional competence and behaviour. They are:

Client specific

• Tax planning must be specific to the client’s facts and circumstances.
• Clients must be alerted to the wider risks and implications of any course of action.

Lawful

• You must act lawfully and with integrity and expect the same from your clients.
• Planning should be based on a realistic assessment of the facts and a credible view of the law.
• You should draw your client’s attention to where the law is materially uncertain e.g. because HMRC take a different view and consider taking further advice where risks are high e.g. litigation.

Disclosure and transparency

• Advice cannot rely on HMRC not having all the relevant facts.
• Any disclosure must fairly represent all relevant facts.

Tax planning arrangements

• You must not create, encourage or promote tax planning arrangements or structures that:
  • Set out to achieve results contrary to 'the clear intention of Parliament'.
  • 'Are highly artificial or highly contrived and seek to exploit shortcomings within the relevant legislation'.
• If you have a genuine and reasonable uncertainty as to whether any particular planning is in breach of this requirement you should:
  • Document the reasoning and evidence to demonstrate why you believe it is not.
  • Iinclude in your advice an assessment of the uncertainties/risks and any disclosure which should be made to HMRC.

Professional judgement and appropriate documentation

• You should always apply judgement in advisory situations.
• You should keep timely notes on the rationale for any such judgements.

Potential problem areas

What is meant by 'The clear intention of Parliament'?

• Evidence as to Parliament's intention can be found in the legislation, HMRC's guidance notes published with the draft legislation, consultations, minister's replies to written answers and the Hansard debates on the relevant finance bill etc.

What is meant by 'Highly artificial or highly contrived and seek to exploit shortcomings within the relevant legislation'?

• This should not affect ordinary tax planning: there is a high bar set by the inclusion of 'highly'. This is designed to catch artificial circular planning and artificial steps e.g. cases where the Ramsay principle might apply.
• Ordinary tax planning, for example, advising on the best balance of income in relation to a relevant relief will not be caught.
• Tax planning that seeks to deliberately exploit unintended mismatches of legislation may well be caught. 

Penalties for enablers

• According to the ICAEW tax faculty, HMRC says that members following the spirit of the PCRT will not be subject to the new penalty regime for Enablers of tax avoidance schemes.

General standards for agents

In 2016 HMRC published its 'Standards for agents'. These standards are non-statutory and are aimed at tax agents who are not members of any tax bodies. In January 2018 they were updated to include new requirements for giving advice on tax planning. The standards mirror those of the PCRT.

HMRC's standards:

Integrity

We expect agents to be straightforward and honest with HMRC, for example:

• Disclose all relevant information.
• Do not imply that you’re regulated for tax by HMRC.

Professional competence and due care

We expect agents to:

• Keep correct and up-to-date knowledge of the areas of tax that you deal with.
• Work to prevent errors in your clients’ tax calculations or claims.
• Advise your client to take steps to set matters right where you find errors in their tax affairs.
• Keep online access credentials safe from unauthorised use at all times.

Professional behaviour

We expect agents to:

• Comply fully with tax law and regulations.
• Ensure your own tax affairs are correct and up to date.
• Deal courteously and professionally with staff.
• Consider the risk to reputation of tax agents, of any arrangements that you advise a client about, for example, tax planning schemes.

Tax planning

In addition to the above, HMRC expects agents to follow these principles when advising on tax planning.

• Lawful
  • Agents must act lawfully and with integrity at all times and expect the same from their clients.
  • Tax planning should be based on a realistic assessment of the facts and a credible view of the law.
  • Agents should advise their clients where there is a material uncertainty in the law. The risk and costs of challenge by HMRC, and any resultant court case, should be made clear to clients.
• Disclosure and transparency
  • HMRC expects any disclosure by agents to represent all relevant facts fairly.

• Agents must not create, encourage or promote tax planning arrangements or structures that:

  • Set out to achieve results that are contrary to the clear intention of Parliament. 
  • Are highly artificial or highly contrived and seek to exploit shortcomings in the relevant legislation.

The professional bodies have agreed a series of Q&As which explain a member's duties in respect of PCRT when they are providing any service that contributes directly or indirectly to the preparation, submission, agreement of and advice on any or all aspects of a company’s research & development (R&D) claim.

The guidance also provides advice as to what to do if you come across a firm providing R&D tax credit advice which is not registered for Anti-Money Laundering (AML) Supervision or does not appear to be meeting the requirements under the AML legislation.

See:

ACCA: PCRT guidance on R&D

CIOT: PCRT guidance on R&D

ICAEW: PCRT guidance on R&D

ICAS: PCRT guidance on R&D

PCRT: links to guidance by the professional accountancy and tax bodies

HMRC's Standards for agents can be found here.