Chartered Institute of Taxation (CIOT / CTA) Professional Skills, Ethics and Law Flashcards

24 sample cards from the Professional Skills, Ethics and Law deck

Sampled from the end of the deck, so these are different cards from the ones shown on the syllabus page.

1. What does DOTAS stand for, and what is its purpose?

   Disclosure of Tax Avoidance Schemes. It requires promoters (and sometimes users) to notify HMRC of certain tax avoidance arrangements that meet defined 'hallmarks', giving HMRC early warning.

2. Under DOTAS, what is a Scheme Reference Number (SRN) and how is it used?

   An 8-digit number HMRC issues to a notified scheme; the promoter must pass it to users, who must report it on their tax return (e.g. form AAG4) so HMRC can link users to the scheme.

3. What is the general anti-abuse rule (GAAR) and what test does it apply?

   A statutory rule (FA 2013) that counteracts tax advantages from 'abusive' arrangements. The 'double reasonableness' test: arrangements are abusive if they cannot reasonably be regarded as a reasonable course of action in relation to the relevant tax provisions.

4. What is the 'HMRC Standard for Agents' designed to do?

   Set out the behaviour HMRC expects of all paid tax agents (integrity, professional competence, lawful conduct), covering standards on transparency, record-keeping, and not promoting tax avoidance, with sanctions for breach.

5. What are 'PCRT enablers' rules / the enablers penalty regime targeting?

   The 'enablers of defeated tax avoidance' regime (FA 2017) imposes a penalty on anyone who enables abusive tax arrangements later defeated by HMRC; PCRT's tax-planning standards align members with avoiding such enabler behaviour.

6. When analysing a complex client scenario, what is the recommended first step before giving advice?

   Establish and verify the relevant facts, identify the client's objectives and constraints, and determine which technical rules apply — separating facts from assumptions and identifying missing information.

7. In presenting recommendations to a client, what elements should a well-structured tax advice letter contain?

   Statement of facts/assumptions, the client's objectives, the technical analysis and options, clear recommendations with tax/commercial consequences, any risks/uncertainties, action points/deadlines, and appropriate caveats and scope limitations.

8. What does 'commercial awareness' require of a tax adviser when advising on a transaction?

   Considering the wider business context — cash flow, financing, commercial objectives, reputational and regulatory risk, and non-tax costs — rather than recommending a course of action driven by tax savings alone.

9. Why is 'prioritisation and assimilation of information' an examined skill, and how is it applied?

   Real cases present large volumes of mixed-relevance data; the adviser must rapidly identify material facts, discard irrelevant detail, weigh issues by financial/risk significance, and address the highest-impact matters first.

10. In contract law, what are the essential elements required to form a legally binding contract?

    Offer, acceptance, consideration, intention to create legal relations, and capacity (plus certainty of terms and legality).

11. What is the difference between an 'offer' and an 'invitation to treat' in contract law?

    An offer is a definite promise to be bound on specified terms once accepted; an invitation to treat (e.g. goods on display, advertisements) is merely an invitation to others to make offers and cannot itself be accepted to form a contract.

12. What is 'consideration' in contract law, and the rule about its adequacy?

    Something of value given by each party (a benefit or detriment) in exchange for the other's promise. Consideration must be sufficient (have some value) but need not be adequate (need not be a market/equal price).

13. In the law of agency, how does an agency relationship typically arise?

    By express or implied agreement, by ratification of an unauthorised act, by necessity, or by estoppel (apparent/ostensible authority).

14. Distinguish 'actual authority' from 'apparent (ostensible) authority' of an agent.

    Actual authority is the authority expressly or impliedly granted by the principal. Apparent authority arises where the principal represents (by words or conduct) that the agent has authority, binding the principal to third parties even if no actual authority exists.

15. What are the principal fiduciary duties an agent owes to the principal?

    To act within authority, exercise reasonable care and skill, act personally (not delegate), avoid conflicts of interest, not make a secret profit or take bribes, account to the principal, and keep confidentiality.

16. Compare the key features of a sole trader, a partnership, and a limited company as business structures.

    Sole trader: no separate legal entity, unlimited personal liability. Partnership: two or more persons sharing profits, generally unlimited joint liability (LLP excepted). Company: separate legal personality, limited liability for members, but greater regulation and disclosure.

17. What is the doctrine of 'separate legal personality' and which case established it?

    A registered company is a legal person distinct from its members/directors, owning its own assets and liable for its own debts. Established in Salomon v A Salomon & Co Ltd [1897].

18. Distinguish a Limited Liability Partnership (LLP) from a general partnership.

    An LLP is a separate legal entity with limited liability for its members and must register at Companies House and file accounts; a general partnership has no separate legal personality and partners bear unlimited joint (and several) liability.

19. What are the three certainties required to create a valid express trust?

    Certainty of intention (to create a trust), certainty of subject matter (the trust property), and certainty of objects (the beneficiaries).

20. In the law of property/trusts, distinguish 'legal' from 'equitable (beneficial)' ownership.

    Legal ownership is the title held by the trustee (the right to manage/deal with property); equitable/beneficial ownership is the interest held by the beneficiary (the right to enjoy the property's benefits). A trust splits these two.

21. Distinguish a 'fixed (interest in possession) trust' from a 'discretionary trust'.

    In a fixed/interest-in-possession trust a beneficiary has a present right to income/property as defined; in a discretionary trust the trustees have discretion over which beneficiaries receive income/capital and how much, so no beneficiary has an entitlement until exercised.

22. What are the four elements a claimant must prove to succeed in the tort of negligence?

    A duty of care owed by the defendant, breach of that duty, causation (factual and legal), and resulting loss/damage that is not too remote.

23. Which case established the modern 'neighbour principle' / duty of care in negligence, and the current test for novel duties?

    Donoghue v Stevenson [1932] established the neighbour principle; the current three-stage test (Caparo v Dickman) requires foreseeability of harm, proximity, and that imposing a duty is fair, just and reasonable.

24. On what basis can a tax adviser/accountant be liable for professional negligence causing pure economic loss to a client or third party?

    Liability arises where there is an assumption of responsibility and reasonable reliance (the Hedley Byrne v Heller principle); the adviser owes a duty to exercise reasonable care and skill, breach of which causing loss gives rise to a claim.

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