ACCA Advanced Taxation (ATX) Practice Exam

What is a key consideration for tax advisers regarding disclosure to HMRC for new sources of income?

1. Disclosure is optional unless the amount is large

2. All sources of income must be disclosed

3. Disclosure is only necessary if asked by HMRC

4. Only business income needs to be disclosed

The correct answer is: All sources of income must be disclosed

The key consideration for tax advisers regarding disclosure to HMRC for new sources of income is that all sources of income must be disclosed. This aligns with the obligation of taxpayers to report their income accurately to HMRC to ensure compliance with tax laws. Failing to disclose any sources of income can lead to penalties and enforcement actions, as HMRC requires complete transparency to assess the correct amount of tax owed. Tax advisers must counsel their clients to report all income, regardless of the amount or type, because HMRC operates on a comprehensive assessment principle. This means that not only business income but also personal and other types of income need to be included in tax returns. Such diligence helps avoid future complications during tax audits or inquiries from HMRC regarding unreported income streams.