ACCA Advanced Taxation (ATX) Practice Exam

When can a tax adviser inform HMRC about a client's undisclosed income?

1. When the client has given permission

2. At any time without restrictions

3. Only in extreme cases of tax evasion

4. When the income is verified by an accountant

The correct answer is: When the client has given permission

A tax adviser can inform HMRC about a client's undisclosed income only when the client has given permission. This is grounded in the principles of client confidentiality and the adviser-client relationship. Tax advisers have a professional duty to maintain the confidentiality of the information shared by their clients, and disclosing any information without explicit consent would violate that trust and potentially legal obligations. The requirement for client permission ensures that clients have control over their financial information and can make informed decisions about how their affairs are managed and reported to tax authorities. This aspect of consent is not just about legal compliance but also about maintaining professional integrity and the trust that forms the foundation of the adviser-client relationship. In contrast to this, informing HMRC at any time without restrictions does not respect the boundaries of confidentiality established in professional ethics. Extreme cases of tax evasion could require specific legal obligations, but standard practice still necessitates client consent. Verification of income by an accountant, while a positive practice, does not automatically grant permission to disclose information without the client's consent. Thus, the only correct scenario for informing HMRC about undisclosed income involves obtaining prior approval from the client.