Tax irregularities – should I resign?

Irregularities include all errors, whether they have been made by the client, the practitioner, HMRC or any other party involved in a client’s tax affairs. If a practitioner becomes aware of a possible irregularity in a client’s tax affairs, then they should inform the client as soon as they have knowledge of the irregularity. 

Overpaid tax

Where the irregularity has resulted in the client paying too much tax, the practitioner should advise the client about making a repayment claim, having regard to any relevant time limits. 

Underpaid tax

Where a practitioner suspects that an irregularity may have occurred resulting in an underpayment of tax, they should discuss this with the client to remove or confirm the suspicion. The member should take into account the fact that they may not be aware of all the facts and circumstances and may not be able to reach a conclusion.   

A practitioner must act correctly from the outset and keep sufficient, appropriate records of discussions and advice. When dealing with irregularities, they should: 

  • give the client appropriate advice
  • if necessary, so long as they continue to act for the client, seek to persuade the client to behave correctly
  • take care not to appear to be assisting a client to plan or commit any criminal offence or to conceal any offence which has been committed
  • in appropriate situations, or where in doubt, discuss the client’s situation with a colleague or an independent third party (having due regard to client confidentiality).

Although a member is not under a duty to make enquiries to identify irregularities which are unrelated to the work which they have been engaged to undertake, if they do become aware of any irregularity in a client’s tax affairs, they should consider the following: 

1.  The size of the tax effect
In the opinion of the accountancy professional bodies, in Professional Conduct in Relation to Taxation paragraph 5.17, it is reasonable for a practitioner to take no steps to advise HMRC of isolated errors where the tax effect is no more than minimal – say up to £200 – as these will probably cost HMRC and the client more to process than they are worth to the Exchequer.

2.  Client’s authorisation  required to disclose the irregularity
If the client is unwilling to make a full disclosure to HMRC, the member should ensure that their conduct and advice are such as to prevent their own probity being called into question.

It is essential therefore to advise the client, in writing, setting out the facts as understood by the practitioner, confirming to the client their advice to disclose and the consequences of non-disclosure. 


If, despite being fully advised of the consequences, the client still refuses to make an appropriate disclosure to HMRC, the member must: 

  • cease to act
  • if relevant, inform HMRC of their withdrawal
  • consider withdrawing reports which they have previously signed in respect of the client
  • consider whether a money laundering report should be made to the money laundering reporting officer (MLRO) or National Crime Agency (NCA)
  • consider carefully their response to any professional enquiry letter (also known as professional clearance letter).

Ceasing to act

If it came to the attention of HMRC that a practitioner had continued to act after becoming aware of undisclosed errors the practitioner’s relationship with HMRC would be prejudiced. HMRC might, in some circumstances, consider them to be knowingly or carelessly concerned in the commission of an offence, or to be engaged in dishonest conduct.

The practitioner should consider carefully whether it is appropriate to continue to act in relation to any non-tax matters of the client. Where the member must cease to act in relation to the client’s tax affairs they should inform the client accordingly, in writing.

Informing HMRC

Where the practitioner had been dealing with HMRC on the client’s behalf or formally appointed as a tax agent, the practitioner should notify HMRC that they have ceased to act for that client. Because of the obligation to maintain client confidentiality, a member should not provide HMRC with an explanation as to the reasons for ceasing to act.

Withdrawing reports signed by the practitioner

Where a practitioner has undertaken work to verify or audit accounts or statements which carried a report signed by them which is subsequently found to be misleading, the same principles of client confidentiality apply. If the engagement letter provides the practitioner with the authority to notify HMRC in such circumstances, they should inform HMRC that they have information indicating that the accounts or statements cannot be relied upon.

If the practitioner does not have their client’s consent to the disclosure, they should write to the client and explicitly ask for permission to withdraw the report; if unsuccessful, they should then obtain specialist legal advice as to what action they should take.

They should not explain to HMRC the reasons why the returns, accounts, etc. are defective. To do so without the client’s consent is more likely than not to be considered by a court of law as a misuse of confidential information and an unjustified breach of client confidentiality.

Reporting to money laundering reporting officer/National Crime Agency

In deciding whether a report should be made to NCA, the practitioner (or their MLRO) should take into account the various requirements of the legislation, guidance and any reporting exemption which might apply.

Professional clearance

Before responding to a request for information from a prospective adviser, a member must ensure that he has authority from the former client to disclose all the information needed and reasonably requested by the prospective adviser to enable him to decide whether to accept the work.

Only to the extent that they are authorised to do so should the practitioner discuss freely with the prospective adviser all matters of which the prospective adviser should be made aware.

If the client refuses permission to the practitioner to discuss all or part of their affairs, the practitioner should inform the prospective adviser of this fact. It is then up to the prospective adviser to make enquiries from the client as to the reasons for such a refusal.