PCRT helpsheet: Tax returns

This helpsheet provides further guidance on the application of the Fundamental Principles and Standards when dealing with the day-to-day work of completing tax returns, including the issues of: responsibilities; materiality; disclosure and approval.

Definition of a tax return (return)




Supporting documents


Approval of tax returns


Signing tax returns

Definition of tax return (return)

For the purposes of this guidance, the term ‘return’ includes any document or online submission of data that is prepared on behalf of the client for the purposes of disclosing to any taxing authority details that are to be used in the calculation of tax due by a client or a refund of tax due to the client or for other official purposes and, for example, includes:

  • Self-assessment returns for income or corporation tax;
  • VAT and Customs returns;
  • PAYE returns;
  • Inheritance tax returns;
  • Returns or claims in respect of any other tax or duties where paid to the UK Government or any authority, such as a devolved government.

A letter giving details in respect of a return or as an amendment to a return including, for example, any voluntary disclosure of an error should be dealt with as if it was a return.


Taxpayer's responsibility 

The taxpayer has primary responsibility to submit correct and complete returns to the best of their knowledge and belief. The return may include reasonable estimates where necessary. It follows that the final decision as to whether to disclose any issue is that of the client.

Member’s responsibility

A member who prepares a return on behalf of a client is responsible to the client for the accuracy of the return based on the information provided.

In dealing with HMRC in relation to a client’s tax affairs a member must bear in mind their duty of confidentiality to the client and that they are acting as the agent of their client. He has a duty to act in the best interests of their client.

A member must act in good faith in dealings with HMRC in accordance with the fundamental principle of integrity. In particular, the member must take reasonable care and exercise appropriate professional scepticism when making statements or asserting facts on behalf of a client. Where acting as a tax agent, a member is not required to audit the figures in the books and records provided or verify information provided by a client or by a third party. A member should take care not to be associated with the presentation of facts they know or believes to be incorrect or misleading nor to assert tax positions in a tax return which they consider have no sustainable basis.

When a member is communicating with HMRC, they should consider whether they need to make it clear to what extent they are relying on information which has been supplied by the client or a third party.


Whether an amount is to be regarded as material depends upon the facts and circumstances of each case.

The profits of a trade, profession, vocation or property business must be computed in accordance with Generally Accepted Accounting Principles (GAAP) subject to any adjustment required or authorised by law in computing profits for those purposes. This permits a trade, profession, vocation or property business to disregard non-material adjustments in computing its accounting profits. However, it should be noted that for certain small businesses an election may be made to use the cash basis instead.

The application of GAAP, and therefore materiality, does not extend beyond the accounting profits. Thus the accounting concept of materiality cannot be applied when completing tax returns (direct and indirect), for example when:

  • Computing adjustments required to accounting figures so as to arrive at taxable profits;
  • Allocating income, expenses and outgoings across the relevant boxes on a self-assessment tax return;
  • Collating the aggregate figures from all shareholdings and bank accounts for disclosure on tax returns.


If a client is unwilling to include in a tax return the minimum information required by law, the member should follow the guidance on Dealing with Irregularities. The paragraphs below (up to the Supporting documents section) give guidance on some of the more common areas of uncertainty over disclosure.

In general, it is likely to be in a client’s own interests to ensure that factors relevant to their tax liability are adequately disclosed to HMRC because:

  • Their relationship with HMRC is more likely to be on a satisfactory footing if they can demonstrate good faith in their dealings with them; and
  • They will reduce the risk of a discovery or further assessment and may reduce exposure to interest and penalties.

It may be advisable to consider fuller disclosure than is strictly necessary. The factors involved in making this decision include:

  • The terms of the applicable law;
  • The view taken by the member;
  • The extent of any doubt that exists;
  • The manner in which disclosure is to be made; and
  • The size and gravity of the item in question.

When advocating fuller disclosure than is strictly necessary a member should ensure that their client is adequately aware of the issues involved and their potential implications. Fuller disclosure should not be made unless the client consents to the level of disclosure.

Cases will arise where there is doubt as to the correct treatment of an item of income or expenditure, or the computation of a gain or allowance. In such cases a member ought to consider carefully what disclosure, if any, might be necessary. For example, additional disclosure should be considered where:

  • A return relies on a valuation;
  • There is inherent doubt as to the correct treatment of an item, for example, expenditure on repairs which might be regarded as capital in whole or part, or the VAT liability of a particular transaction; or
  • HMRC has published its interpretation or has indicated its practice on a point, but the client proposes to adopt a different view, whether or not supported by Counsel’s opinion. The member should refer to the guidance on the Veltema case and the paragraph below. See also HMRC guidance.

A member who is uncertain whether their client should disclose a particular item or of its treatment should consider taking further advice before reaching a decision. They should use their best endeavours to ensure that the client understands the issues, implications and the proposed course of action. Such a decision may have to be justified at a later date, so the member’s files should contain sufficient evidence to support the position taken, including timely notes of discussions with the client and/or with other advisers, copies of any second opinion obtained and the client’s final decision. A failure to take reasonable care may result in HMRC imposing a penalty if an error is identified after an enquiry.

The 2012 case of Charlton clarified the law on discovery in relation to tax schemes disclosed to HMRC under DOTAS. The Upper Tribunal made clear that where the taxpayer has:

  • Disclosed details of a significant allowable loss claim;
  • Declared relatively modest income/ gains; and/ or
  • Included the SRN issued by HMRC on the appropriate self-assessment tax return,

an HMRC officer of reasonable knowledge and skill would be expected to infer that the taxpayer had entered into a tax avoidance scheme (and that fuller details of such scheme would be contained in the relevant AAG1 Form). As a result, HMRC would be precluded, in most cases, from raising a discovery assessment in a situation where the client implemented the disclosed scheme and HMRC failed to open an enquiry within the required time.

It is essential where a member is involved in the preparation of a self-assessment tax return which includes a scheme disclosed under DOTAS that the member takes care to ensure:

  • That the tax return provides sufficient details of any transactions entered into (in case the AAG1 Form is incomplete);
  • That the SRN is recorded properly in the appropriate box included for this purpose on a self- assessment tax return; and
  • The SRN is shown for the self-assessment return for each year in which the scheme is expected to give the client a tax advantage.

Supporting documents

For the most part, HMRC does not consider that it is necessary for a taxpayer to provide supporting documentation in order to satisfy the taxpayer’s overriding need to make a correct return. HMRC’s view is that, where it is necessary for that purpose, explanatory information should be entered in the ‘white space’ provided on the return. However, HMRC does recognise that the taxpayer may wish to supply further details of a particular computation or transaction in order to minimise the risk of a discovery assessment being raised at a later time. Following the uncertainty created by the decision in Veltema, HMRC‘s guidance can be found in SP1/06 – Self Assessment: Finality and Discovery.

Further HMRC guidance says that sending attachments with a tax return is intended for those cases where the taxpayer ‘feels it is crucial to provide additional information to support the return but for some reason cannot utilise the white space’.

Reliance on HMRC published guidance

Whilst it is reasonable in most circumstances to rely on HMRC published guidance, a member should be aware that the Tribunal and the courts will apply the law even if this conflicts with HMRC guidance.

Notwithstanding this, if a client has relied on HMRC guidance which is clear and unequivocal and HMRC resiles from any of the terms of the guidance, a Judicial Review claim is a possible route to pursue.


The GAAR applies on a self-assessment basis. A member should consider whether the GAAR could apply when completing a tax return. Application of the GAAR is difficult and if the position is not clear then the client should be advised that specialist assistance or a second opinion is necessary. See also Tax Advice.

Where it is uncertain whether the GAAR applies the member should consider recommending additional and appropriate disclosure. Where the client disagrees the member should clearly record their advice and consider whether they can act as agent. See also Dealing with irregularities.

These principles also apply when considering the General Anti- Avoidance Rule under the Revenue Scotland and Tax Powers Act 2014.

Approval of tax returns

It is essential that the member advises the client to review their tax return before it is submitted.

The member should draw the client’s attention to the responsibility which the client is taking in approving the return as correct and complete. Attention should be drawn to any judgemental areas or positions reflected in the return to ensure that the client is aware of these and their implications before he approves the return.

A member should obtain evidence of the client’s approval of the return in electronic or non-electronic form.


Where a return is not reviewed by the client before submission, then, because of the risk to the adviser, the terms of the engagement should make clear that returns are completed on the basis of the information provided by the client and the client is no less responsible for errors in returns which have been prepared on the basis of that information than if they had approved and signed the returns personally.

Signing tax returns

A member may sign tax returns in their capacity as liquidator, receiver or administrator or under a personal appointment as trustee, executor, attorney or director.