ACCA Advanced Taxation (ATX) Practice Exam

Which of the following accurately describes the outcome if Gail refuses to disclose her error to HMRC?

1. She will not face any repercussions

2. HMRC will automatically clear her tax liability

3. Tax evasion could lead to criminal proceedings

4. Her IT liability will be reassessed positively

The correct answer is: Tax evasion could lead to criminal proceedings

If Gail refuses to disclose her error to HMRC, the situation could indeed be classified under tax evasion, which is considered a serious offense. Tax evasion involves deliberately misrepresenting or concealing information to reduce tax liability, and it can lead to severe consequences, including criminal charges. By choosing not to report her tax error, she exposes herself to the risk of HMRC engaging in investigations or audits, which could uncover her wrongdoing. If proven guilty of tax evasion, she might face significant penalties, including substantial fines or even imprisonment, depending on the severity of the offense. The context surrounding the other options highlights the importance of voluntary disclosure. When errors are reported to HMRC, it can often lead to more favorable outcomes, such as the possibility of minimized penalties or leniency regarding her tax circumstances. However, refusal to disclose such errors could lead to harsher repercussions, as tax authorities prioritize compliance and transparency.