ACCA Advanced Taxation (ATX) Practice Exam

Regarding tax evasion, what is a client obligated to do if they discover an omission?

1. Ignore it unless caught

2. Report the omission to HMRC

3. Consult their advisor before any action

4. Pay any charges without reporting

The correct answer is: Report the omission to HMRC

When a client discovers an omission in their tax reporting, they have a legal and ethical obligation to report this finding to HMRC (Her Majesty's Revenue and Customs). This is crucial as tax evasion involves intentionally misrepresenting or concealing information to avoid paying the correct amount of tax. By reporting the omission, the client acknowledges the mistake and takes steps to correct it, which can potentially mitigate the consequences of any penalties or interest charges that may arise from the oversight. Prompt reporting can be viewed favorably by tax authorities and may reduce the severity of penalties, as it demonstrates compliance and a willingness to rectify mistakes. Therefore, the obligation to report the omission aligns with maintaining transparency and integrity in tax affairs. In contrast, ignoring the omission without reporting could lead to greater penalties if discovered later; merely consulting an advisor before taking action may delay necessary compliance, and paying charges without reporting does not fulfill the client's duty to rectify the situation with HMRC.