ACCA Advanced Taxation (ATX) Practice Exam

What should be advised to Emma if the scheme is confirmed as a tax avoidance scheme?

1. Proceed with caution and document the process

2. Encourage her to consult with another advisor

3. Resign from the engagement and inform HMRC

4. Continue to monitor the scheme's effects

The correct answer is: Resign from the engagement and inform HMRC

When a scheme is confirmed as a tax avoidance scheme, it indicates a potential conflict with tax regulations and principles. In such situations, the advisor has a responsibility to act in accordance with legal and ethical standards. Resigning from the engagement and informing HMRC is a prudent course of action. This ensures that the advisor distances themselves from any dealings that could be considered unethical or potentially illegal, protecting both their reputation and professional integrity. Moreover, notifying HMRC about the scheme further aligns with the advisor's obligation to comply with regulations governing tax practices. This course of action cultivates transparent and honest behavior, which is crucial in maintaining trust in the tax advisory profession. By managing the situation in this way, the advisor fulfills their duty to uphold the law and maintain ethical standards, rather than continuing to engage in practices that could lead to legal issues for both them and their client.