ACCA Advanced Taxation (ATX) Practice Exam

What major consideration must advisors keep in mind when handling tax schemes for clients like Emma?

1. Maximizing the client’s investment return

2. Ensuring compliance with ethical standards

3. Minimizing the client's workload

4. Using aggressive tax strategies for savings

The correct answer is: Ensuring compliance with ethical standards

When handling tax schemes for clients, advisors must prioritize ensuring compliance with ethical standards over other concerns. This consideration is paramount because tax law is complex and often subject to interpretation. Advisors have a duty to uphold integrity and professionalism, particularly in tax matters where aggressive strategies can lead to scrutiny from tax authorities. By adhering to ethical standards, advisors protect their clients from potential legal issues, such as audits or penalties that can arise from questionable tax strategies. Additionally, maintaining compliance fosters trust and long-term relationships with clients, as integrity is a core value in professional advisory services. While maximizing investment return and minimizing workload are important aspects of client servicing, they should never come at the cost of ethical compliance. Using aggressive tax strategies can offer short-term benefits in terms of savings but increases the risk of non-compliance, which undermines the advisor's responsibility to act in the best interests of the client and uphold the law.