PCRT – what AAT members need to know about the 5 new standards

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The 1st of March saw the latest version of Professional Conduct in Relation to Tax come into effect. 

PCRT, as the document is more commonly known has been around for well over 20 years.

It is prepared and co-owned by the seven main accountancy and tax professional bodies (including AAT) and sets out the fundamental principles and standards that members working in tax are expected to follow in their tripartite relationship (tax adviser, client and HMRC).

The five fundamental principles

PCRT is based on five fundamental principles

  • Integrity
  • Objectivity
  • Professional competence and due care
  • Confidentiality
  • Professional behaviour

Introducing… five new standards

In the latest version the existing five fundamental principles have been strengthened through the addition of five new standards, which members must observe when considering tax planning.

These new standards make it clear members must not:

  • Create, encourage or promote tax planning arrangements or structures that set out to achieve results that are contrary to the clear intention of Parliament.
  • Furthermore, structures should not be highly artificial or highly contrived and must not seek to exploit shortcomings within the relevant legislation.

Any action to the contrary would leave AAT members open to disciplinary action.

The bolstering of the 2014 version of PCRT has been in direct response to a challenge set by former chief secretary to the Treasury, Danny Alexander. In March 2015, Parliament set out actions taken to tackle evasion and avoidance in documents published. At the time Alexander called upon the tax and accountancy profession to maximise their role in policing the profession, by setting and enforcing clear standards around the promotion of both tax evasion and tax avoidance.

What you need to know

The fundamental principles enshrined in AAT’s Codes of Professional Ethics require that tax planning must be client-specific and that they must be  alerted to the wider risks and the implications of any course of action.

As a tax adviser you must act lawfully and with integrity at all times, and expect the same from your clients.

Any tax planning that you embark upon should be based on a realistic assessment of all available facts and on a credible view of the law. Furthermore, where the law is materially uncertain, for example because HMRC is known to take a different view, you must draw your client’s attention to this fact.

Where necessary, you should consider taking further advice appropriate to the risks and circumstances of the case.

Any advice that you give must not rely for its effectiveness on HMRC having less than the relevant facts.

You must not create, encourage or promote tax planning arrangements or structures that:

  • Set out to achieve results contrary to the clear intention of Parliament in enacting relevant legislation and/or
  • Which are highly artificial or highly contrived and seek to exploit shortcomings within the relevant legislation.

It is also vital that you should keep notes of the rationale for the advice you have given on a timely basis and ensure that you comply with AML requirements.

Does the PCRT apply to members in business/working in-house?

Yes it does. PCRT applies equally to all members who practice in tax, including employees attending to the tax affairs of their employer.

However, it has been recognised by the seven bodies that the current version of PCRT is often worded in such a way as to have an external practitioner in mind. This short coming will be addressed in the next PCRT edition.

If you would like to know more about this, ICAEW have published a helpful overview-guide in the shape of a frequently asked question web-page which is well worth a quick read.

Alternatively, AAT’s own Professional Standards Department offer an Ethics Advice Line 0845 863 0787 (UK), +44 (0)20 7397 3014 (outside UK).

Brian Palmer , former tax policy adviser for AAT..

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