CITN Test of Professional Competence (TPC) flashcards

32 cards. Read the term and the definition here. The deck at the top of this page is optional.

Professional competence standard

A member must only accept work they can perform to the required standard, and must keep technical knowledge current; accepting an engagement beyond competence without supervision breaches professional standards.

Confidentiality principle

Information acquired in a professional capacity must not be disclosed without authority. Exceptions include legal compulsion, court order, regulatory investigation, and client consent, each of which must be documented.

Conflict of interest test

Arises when duties to two parties cannot both be fulfilled. The member must identify it, assess whether safeguards suffice, and obtain informed consent or decline the engagement.

Self-review threat

Occurs when a member evaluates work they previously produced, such as reviewing accounts they prepared. Independence is compromised, so safeguards or engagement refusal are required.

Engagement letter purpose

A written agreement defining scope, responsibilities, fees, and the basis of the tax computation. It limits misunderstanding and provides evidence of the terms agreed with the client.

Source hierarchy in tax

Statute prevails over case law and guidance. Practice statements and revenue guidance are persuasive but cannot override a clear statutory provision or a binding judicial interpretation.

Working paper requirement

Each figure in a return must be supported by a working paper showing the source document, the calculation, and reviewer sign-off. Unsupported figures are treated as unverified.

Contingent fee restriction

A fee contingent on the tax outcome is prohibited where it creates a self-interest threat to objectivity, particularly in aggressive or uncertain positions. Disclosure and prohibition apply.

Material error correction

When a filed return contains a material error, the member quantifies the effect and advises the client of the duty to correct. The client decides; the advice is recorded.

Independence in appearance

Independence must be maintained both in fact and as perceived by a reasonable third party. Preparing and auditing the same entity compromises both aspects without documented safeguards.

Filing deadline penalty

Late filing attracts a fixed penalty that escalates with delay, plus tax-geared penalties on unpaid tax. Interest accrues separately and is not cancelled by a successful penalty appeal.

Amendment window

A taxpayer may amend a return only within the statutory period after filing. Later corrections require a formal claim or assessment procedure with different, often shorter, time limits.

Burden of proof on assessment

Where the revenue authority raises an assessment, the taxpayer generally bears the burden of showing it is excessive. Contemporaneous records are the primary means of rebuttal.

Record retention period

Records supporting a return must be kept for the statutory period measured from the end of the period or the filing date, whichever is later. Failure is a separate penalty exposure.

Information notice powers

The revenue authority may require documents or attendance by notice. Legal professional privilege protects legal advice; ordinary accounting and business records are not protected.

Appeal sequence

Typically internal review, then an independent tribunal, then the appellate court. Each stage has strict time limits, and missing one can extinguish the right of appeal.

Penalty mitigation factors

Penalty percentage depends on reasonable care, disclosure, cooperation, and the tax at stake. Unprompted disclosure attracts a greater reduction than disclosure prompted by an enquiry.

Instalment reduction claim

Where income is uneven, a taxpayer may claim to reduce payments on account. The claim must be evidence-based; an unjustified claim attracts interest and penalty.

Double taxation relief limit

Credit for foreign tax is limited to the lower of foreign tax paid and domestic tax on the same income. Excess credit is generally not refundable, subject to treaty terms.

Best judgement assessment

Raised where the authority considers a return incomplete or incorrect. It stands unless the taxpayer appeals and demonstrates the correct liability with supporting evidence.

Money laundering suspicion

Suspicion that funds derive from crime requires an internal report to the nominated officer. Tipping off the client about the report is a criminal offence and must be avoided.

Tipping off offence

Disclosing to a client that a suspicious activity report has been made, where that disclosure prejudices an investigation, is a criminal offence independent of the underlying tax position.

Client due diligence

Identity and beneficial ownership must be verified before the engagement begins. Failure to complete customer due diligence is a compliance breach regardless of the tax outcome.

Advocacy threat

Arises when a member promotes a client's position so strongly that objectivity is compromised, for example defending an aggressive scheme in public or in negotiation.

Familiarity threat

Arises when a long or close relationship with a client erodes professional scepticism. Rotation, independent review, or engagement decline are typical safeguards.

Intimidation threat

Arises when pressure from a client, such as threats to withdraw work or litigate, discourages the member from acting objectively. The threat must be evaluated and safeguards applied.

Tax avoidance versus evasion

Avoidance arranges affairs within the law to reduce tax; evasion involves concealment, false documents, or misrepresentation. Intent and factual accuracy distinguish the two.

Withdrawal from engagement

Required where the client insists on a false or misleading return. The member documents the reason and considers whether disclosure to the authority is required by law.

Professional indemnity cover

Adequate insurance must be maintained for the work performed. Practising without cover, or outside the insured scope, breaches professional standards and exposes the member personally.

Referral commission disclosure

Any commission received for referring a client to another adviser must be disclosed in writing. Undisclosed commissions create a self-interest threat to objectivity.

Privileged communication limit

Legal professional privilege protects advice given in legal proceedings. Tax advice from an accountant is generally not privileged and can be compelled under an information notice.

Documenting client advice

Advice given, alternatives considered, and the client's decision must be recorded contemporaneously. The record is the primary defence in a later disciplinary or negligence claim.