ACCA Advanced Taxation (ATX) Practice Exam

What happens to a client’s affairs if they authorize you to disclose an error to HMRC?

1. You must inform HMRC of all their tax affairs

2. You cannot disclose any information without their permission

3. You can disclose the error but must not disclose why

4. You must inform police of possible illegal activities

The correct answer is: You can disclose the error but must not disclose why

When a client authorizes you to disclose an error to HMRC, you are permitted to reveal the specific error itself without needing to disclose the underlying reasons unless further authorization is provided. This aligns with the principles of client confidentiality and professional ethics, which stipulate that you must only share the necessary information directly related to the issue at hand. While it's important to maintain the client's trust and confidentiality, the authorization to disclose allows you to correct an error effectively and ensure that the client meets their tax obligations with HMRC. However, the reasons behind the error, especially if they involve sensitive discussions or matters that the client wishes to keep private, do not need to be disclosed unless explicitly permitted. The option regarding informing HMRC of all their tax affairs goes beyond the scope of what is authorized by the client, and confidentiality rules prevent the disclosure of all their affairs without clear permission. Similarly, reporting to the police about potential illegal activities is not necessary unless there is an obligation to report crimes or suspicions thereof, which is a separate legal consideration. Disclosing information without the client's express permission contradicts the ethical standards required in tax practice.