Ethical issues arise frequently in tax advisory practice. Below are common scenarios and recommended approaches.

Scenario 1: Client wants aggressive planning:

"My friend has a scheme that saves 60% on CGT — involving offshore structures and trusts. Can we do this for me?"

Approach:

Review the scheme details carefully
Assess against PCRT Standard 4 — is it highly artificial or contrary to legislative intent?
If abusive: REFUSE to advise; explain why (GAAR risk, enablers penalty, PCRT breach)
Offer legitimate alternatives that achieve similar economic outcomes (BADR, gift relief + PET combination, SEIS/EIS reinvestment)
Document the advice given, including refusal of aggressive planning

Scenario 2: Error in past tax return discovered:

"I realised I understated my rental income last year by £20,000. What should I do?"

Approach:

Encourage the client to DISCLOSE to HMRC — unprompted disclosure significantly reduces penalties
Use HMRC's Let Property Campaign or similar disclosure facility
Quantify the unpaid tax, interest, and potential penalties
If client refuses to correct: advise in writing; if persisting refusal on significant amounts = potential tax evasion → consider ceasing to act + submit SAR to NCA
Document the advice and the client's decisions

Scenario 3: Conflict of interest:

You're advising Husband on divorce tax planning. Wife asks you (separately) to also advise her.

Approach:

Identify the conflict — divergent interests in a divorce context
Assess whether the conflict can be managed (Chinese walls, separate teams, separate partners)
In most divorce cases: cannot act for both parties adequately
Obtain INFORMED CONSENT if proceeding with safeguards — likely refused in divorce
Decline to act for Wife (or Husband) and refer her to another firm
Maintain confidentiality about Husband's affairs

Scenario 4: Money laundering suspicion:

A new client presents unexplained cash deposits totalling £500,000 in their accounts. When asked, they offer vague explanations.

Approach:

Continue due diligence — request specific evidence of the source of funds
If source cannot be verified or explanations don't add up: SUSPICION of money laundering
Submit Suspicious Activity Report (SAR) to the National Crime Agency (NCA)
DO NOT TIP OFF the client — tipping off is a criminal offence under POCA
Consider whether to continue acting — may need NCA consent if continuing
Document the decision-making process

Scenario 5: Pressure from senior partner:

A partner in your firm tells you to sign off on aggressive tax advice that doesn't meet PCRT Standard 4. The partner claims it's "within the letter of the law" and the client will leave if not helped.

Approach:

Professional standards OUTRANK employer demands
Raise concerns with the partner IN WRITING — document the discussion
If concerns not addressed: escalate to firm's ETHICS PARTNER or MANAGING PARTNER
If the firm persists: consider REPORTING to the professional body (ICAEW)
Consider WHISTLEBLOWING if illegal activity (protected under Public Interest Disclosure Act 1998)
Ultimate step: LEAVE the firm if ethical compromise continues
Individual liability: YOU could be subject to enablers penalty or professional discipline if you sign off on prohibited arrangements

Scenario 6: Client requests confidentiality on a clearly-illegal arrangement:

"This is all confidential — I don't want HMRC to know about this offshore account."

Approach:

Confidentiality is NOT ABSOLUTE
Legal requirements (SAR obligations) OVERRIDE confidentiality
If suspicion of money laundering (including tax evasion proceeds): SAR required
Do NOT promise absolute confidentiality
Explain the legal framework and professional obligations
If client won't provide full transparency: CEASE TO ACT
Submit SAR as appropriate; do not tip off

Scenario 7: Referring client to another firm:

A client has engaged an overseas adviser who promotes aggressive schemes. Client asks you to handle UK tax compliance for those schemes.

Approach:

Review the schemes against PCRT Standard 4
If compliance work would mean OUR firm is tacitly endorsing an abusive arrangement: decline
If purely mechanical compliance (no endorsement): may proceed, but document the position
Consider risk of becoming an "enabler" of defeated schemes — penalty exposure
Note: PCRT doesn't stop us doing compliance; it stops us creating/promoting abusive schemes. But if our compliance LEGITIMISES the scheme in the client's eyes: that's different

General principles for ethical scenarios:

Document everything — contemporaneous notes protect you
Consult colleagues — don't make lonely decisions on difficult cases
Use ICAEW ethics helpline — for confidential advice on dilemmas
Prefer withdrawal over compromise — ceasing to act is always an option
Advise clients in writing — if they choose against your advice, at least you've documented the professional view
Know the SAR obligations — when in doubt, submit
Never tip off — criminal offence

Business Planning: Taxation