When a client will not correct a tax error

Q: What are the three stages before ceasing to act?

Stage 1: ask for authority. Ask the client's permission to notify HMRC, encourage timely disclosure, and explain their obligations together with interest and penalties for errors. Whether to follow the advice is ultimately the client's decision. Stage 2: explain the consequences orally. If the client is reluctant, explain the potential consequences of not disclosing, the benefit of a voluntary disclosure in reducing penalties, and HMRC's wide powers to obtain information from taxpayers, agents and third parties. Tell the client that you will put your advice in writing, will have to cease to act if disclosure is not made, and must respond to the next adviser's professional enquiry. For a company or other organisation, raise it at a higher level within the client. Stage 3: put it in writing. Write to the client setting out the facts as you understand them, your advice to disclose and the consequences of not doing so. If the client then delays, decide at what point the delay amounts to a refusal. For a self assessment error, the client should amend the return if still within time. GOV.UK says a return can be corrected within 12 months of the filing deadline; after that the client must write to HMRC. Help Sheet C1 says that where the time limit has passed, the client should give HMRC sufficient and accurate information to explain the error.

Q: How does this play out in practice?

Illustration only. While preparing a sole trader's accounts, an accountant finds that £8,000 of cash sales from the previous year never reached the bank or the return. The client says the figure "will not be noticed". The accountant explains the obligation to amend, the interest and penalty position and the lower penalties for an unprompted disclosure. A week later he confirms the advice in a letter. The client still refuses. The accountant writes to say he no longer acts on the client's tax affairs, tells HMRC through the agent channels that he has ceased to act without giving a reason, discusses the case with the firm's MLRO, who submits a SAR, and records every step on file. When the client's new adviser sends a professional enquiry, the accountant asks the former client for authority to discuss the file and, when it is refused, tells the new adviser so.

If a client will not let you correct a tax error that leaves tax unpaid, the professional bodies’ guidance requires you to advise them orally and then in writing of the consequences, and if they still refuse you must stop acting for them on tax work and tell HMRC you no longer act, without giving reasons. You must also consider whether a suspicious activity report is required and how you answer any professional enquiry from the next adviser.

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Where do the rules on client errors come from?

The main source is Professional Conduct in Relation to Taxation (PCRT), issued jointly by seven bodies including ICAEW, ACCA, AAT, ICAS and CIOT, in the version effective from 1 January 2026. PCRT is supported by Help Sheet C1, “Dealing with errors”, which sets out a step by step process for members in practice. ICAEW notes that the help sheets are not mandatory but that a member in a disciplinary case may be asked to explain why they did not follow them.

PCRT paragraph 2.26 adds that where a client ignores advice not to enter into arrangements that are or may be tax evasion, “it is difficult to envisage situations where it would be appropriate for a member to continue to act other than in rectifying the client’s affairs”. HMRC’s Standard for Agents also says that if a client is unwilling to correct inaccuracies, the agent should consider ceasing to act, because continuing could risk enabling tax evasion.

This page deals with the tax adviser’s route. The wider duty to respond to non compliance with laws and regulations is covered in NOCLAR.

Is it really an error, and does it need disclosing?

Help Sheet C1 uses “error” to cover all mistakes, whether made by the client, the adviser, HMRC or anyone else, and whether innocent or deliberate. A member is not required to go looking for errors outside the work they are engaged to do, but once they become aware of one they should follow the guidance whether or not it relates to their own work.

The first step is to establish the facts by discussing the apparent error with the client. If the client gives a satisfactory explanation, the member can carry on. If not, the member should consider whether to continue to act and, if they do, monitor the position. Whatever the outcome, the member should document the discussions, the client’s explanations and their own conclusion with reasons.

Two practical points follow:

Trivial errors. The professional bodies consider it reasonable not to tell HMRC about isolated errors where the tax effect is minimal, “say up to £200”.
Authority. The member needs the client’s authority to disclose, either specifically or through a general authority in the engagement letter. If the amount is material or there is any doubt, the position should be confirmed with the client.

If the member may have caused the error, they should consider notifying their professional indemnity insurers. HMRC over repayments received by the member must be returned to HMRC as soon as practicable; the client’s authority is not needed for that, though the client should be told.

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What are the three stages before ceasing to act?

Stage 1: ask for authority. Ask the client’s permission to notify HMRC, encourage timely disclosure, and explain their obligations together with interest and penalties for errors. Whether to follow the advice is ultimately the client’s decision.
Stage 2: explain the consequences orally. If the client is reluctant, explain the potential consequences of not disclosing, the benefit of a voluntary disclosure in reducing penalties, and HMRC’s wide powers to obtain information from taxpayers, agents and third parties. Tell the client that you will put your advice in writing, will have to cease to act if disclosure is not made, and must respond to the next adviser’s professional enquiry. For a company or other organisation, raise it at a higher level within the client.
Stage 3: put it in writing. Write to the client setting out the facts as you understand them, your advice to disclose and the consequences of not doing so. If the client then delays, decide at what point the delay amounts to a refusal.

For a self assessment error, the client should amend the return if still within time. GOV.UK says a return can be corrected within 12 months of the filing deadline; after that the client must write to HMRC. Help Sheet C1 says that where the time limit has passed, the client should give HMRC sufficient and accurate information to explain the error.

What must happen if the client still refuses?

Help Sheet C1 says the member must cease to act and, if relevant, inform HMRC of the withdrawal, and should:

tell the client in writing that they no longer act on tax, and consider carefully whether to continue with any non tax work;
notify HMRC that they have ceased to act if they were dealing with HMRC or were the formally appointed agent, without explaining why;
consider withdrawing any report they signed on accounts or statements that are now known to be misleading, asking the client for permission and taking specialist legal advice if it is refused;
consider with the firm’s MLRO whether a suspicious activity report to the National Crime Agency is needed;
handle any professional enquiry from a prospective adviser carefully.

The help sheet warns that if HMRC realised the member had continued to act after becoming aware of undisclosed errors, HMRC might regard the member as knowingly or carelessly involved in an offence. Members with concerns about their own position should take specialist legal advice, bearing in mind the offences of failure to prevent the facilitation of tax evasion created by the Criminal Finances Act 2017.

Can the adviser tell HMRC about the error directly?

Generally not. PCRT paragraph 2.19 allows disclosure without consent only where there is an express legal or professional right or duty. Help Sheet C1 says the member should not explain to HMRC why they have ceased to act, or why returns or accounts are defective, because doing so without consent is more likely than not to be treated by a court as misuse of confidential information. The legal route for reporting suspected criminal property is a suspicious activity report, and care is needed not to commit tipping off when talking to the client afterwards. Where a failure to disclose is deliberate, the conduct can amount to evasion; see tax avoidance and tax evasion.

Help Sheet C1 also says that if HMRC fails to take action, such as issuing a discovery assessment, the member has no legal obligation to point that out, though the client should be made aware of the potential for interest and penalties.

What should the outgoing adviser say to the new adviser?

The outgoing member needs the former client’s authority before discussing their affairs with a prospective adviser. If the client refuses permission for all or part of their affairs, the member tells the prospective adviser that, and it is for the new adviser to ask the client why. The process is described in professional clearance.

How does this play out in practice?

Illustration only. While preparing a sole trader’s accounts, an accountant finds that £8,000 of cash sales from the previous year never reached the bank or the return. The client says the figure “will not be noticed”. The accountant explains the obligation to amend, the interest and penalty position and the lower penalties for an unprompted disclosure. A week later he confirms the advice in a letter. The client still refuses. The accountant writes to say he no longer acts on the client’s tax affairs, tells HMRC through the agent channels that he has ceased to act without giving a reason, discusses the case with the firm’s MLRO, who submits a SAR, and records every step on file. When the client’s new adviser sends a professional enquiry, the accountant asks the former client for authority to discuss the file and, when it is refused, tells the new adviser so.

What mistakes do firms make?

Carrying on with the next year’s return while the error is still undisclosed.
Giving only oral advice, so there is no written record of Stage 3.
Telling HMRC why they resigned, in breach of confidentiality.
Assuming that resigning ends the anti money laundering duty, when the SAR decision still has to be made.
Ignoring reports already signed on accounts that are now known to be misleading.
Not checking that the engagement letter gives authority to disclose errors in the first place.

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Sources

Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 8 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.