business-reporting-july-2010-marks-plan

As the engagement letter has been revised in the

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As the engagement letter has been revised in the current year, there appears to be no authority to advise HMRC of the error without the client’s consent. Professional accountants are advised to include the right to communicate with HMRC in their engagement letters with clients. It is important to establish the facts of this apparent error as making unsubstantiated accusations could have consequences both for our firm and for the employee who has informed us of the managing director’s attitude towards the repayment. This may be an attempt to discredit the managing director and we should therefore not rely on this account by the employee in the internal tax department but establish his claim for ourselves The first step is to examine the correspondence regarding the repayment and to establish that HMRC was in full possession of the facts and has made an error. If this is the case, as the error is clearly substantial, we should: ask the client to give us authority to advise HMRC of the error warn the client of the possible legal consequences – a deliberate attempt to benefit from an error made by HMRC may constitute a criminal offence under the Theft Act 1968. advise the client that we will cease to act if consent to disclose is not given. This advice must be recorded in writing and a copy of the meeting notes given to the client. If a crime is committed, (i.e. non-disclosure of the error) there are additional responsibilities for the firm under anti money laundering legislation. A suspicious activity report will be required to SOCA and care should be taken that the firm is not responsible for ‘tipping off’ the client as this is itself a criminal offence under the POCA. Advising the client to stop breaking the law does not constitute ‘tipping off’. Software support payment of £50,000 In order to determine whether there is an ethical issue for our firm with respect to this payment, more information is required regarding the nature of the work performed. The amount appears unusually large for the services provided. It is extremely unusual for no invoice to be supplied for such a large amount. This has implications for both direct taxes and VAT. We need to confirm that no claim for VAT has been made without an invoice displaying the VAT number of the registered trader. The client may inadvertently be party to a money laundering transaction and this may require a suspicious activity report by our firm. However, again care should be taken to establish the facts without tipping off the client. The firm’s money laundering officer must be informed of both transactions and legal advice and advice from ICAEW should be obtained. Further points If we conclude that the managing director’s attitude to tax compliance appears to be very cavalier.
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