EM2788 - Examining Accounts: Accountants And Auditors: discovery of tax evasion
Clients employ accountants to prepare and audit accounts and sometimes to handle their taxation affairs or other matters. In no capacity is the accountant authorised to search for tax evasion (unless specifically required to do so during an enquiry case) - he or she is the agent of the client who is responsible for the accuracy of the information provided.
Occasionally an accountant will discover evidence of tax evasion. If he or she is a member of a professional body, there are strict rules governing their actions in such circumstances. Of course, what an accountant actually does is a matter for the professional body, and is not something an HMRC officer should comment upon. Unqualified agents will act according to the dictates of their personal ethics.
A qualified accountant should do nothing to assist a client to commit any criminal offence. If it seems likely that criminal charges may be made, he or she should advise the client to take specialist legal advice. If there is an anticipated pecuniary settlement, the accountant should explain HMRC’s practice and recommend an immediate full disclosure.
When the client ignores the advice to disclose, the accountant’s actions will depend upon the capacity in which their client retained them. If it included tax matters relating to the offence, the accountant should stress to the client that failure to disclose increases the likelihood of prosecution. If the client refuses to notify HMRC, the accountant should say that they must cease to act and must inform HMRC that they are doing this because accounts or returns, which the accountant signed as accurate returns or accounts, cannot be relied upon. Any potential successor may also decline to act.
In the face of continued refusal to disclose
- if the offence relates to a part of the client’s tax affairs which the accountant does not deal with or to the period prior to acting, the position is the same except that they must inform HMRC that they have ceased to handle the client’s tax affairs
- where the appointment does not include tax matters, there is no obligation on the accountant to cease to act if the client refuses to make a full disclosure.
(This content has been withheld because of exemptions in the Freedom of Information Act 2000)
(This content has been withheld because of exemptions in the Freedom of Information Act 2000)