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UK advisers to alert HMRC if clients use offshore tax structures

Financial advisers in the UK could be required to notify HMRC of all clients using offshore tax planning structures, according to George Bull, a senior tax partner at tax and consulting firm RSM, adding that the measure could be rolled out in the UK’s last ever Spring Budget on Wednesday.

UK advisers to alert HMRC if clients use offshore tax structures


Speaking to International Adviser, Bull said HM Revenue & Customs (HMRC) is considering proposals that would force intermediaries to provide a list of clients using offshore financial arrangements.

As a result, clients would then have to inform the tax authority of their involvement in such structures via a notification number on their personal tax account.

The proposal was originally unveiled last December in a government consultation paper on “high level design principles” regarding the reporting of offshore tax arrangements.

Bull predicts that HMRC, the UK Treasury and chancellor Philip Hammond “won’t miss the opportunity” to approve the requirement in the Budget announcement on Wednesday, although it’s likely another consultation process could be put in place.

Adviser fines

If given the go ahead, the move will step up the UK’s fight against tax avoidance which in recent months has seen the government and the tax office introduce several new measures.

Most recently, in December, HMRC confirmed it will issue hefty fines to financial advisers found guilty of helping their clients avoid tax, as well as targeting all professionals and middlemen “who earn fees and commissions” in marketing tax avoidance schemes, even if their activities do not promote such arrangements.

‘Really tricky area’

Bull warned that if implemented the notification procedures would be “pretty onerous”, flagging up concerns that it can be difficult for UK advisers to determine the full extent of a client’s offshore arrangements.

“It’s difficult for advisers sometimes to know what’s happening. For example, if a client goes to another organisation such as an offshore firm not covered by the UK disclosure requirements and puts in place an offshore tax avoidance structure, the offshore advisers may tell the client ‘there is nothing to disclose on your UK tax return’.

“If that same client then goes to a UK firm to get advice only on his UK tax affairs, the UK advisers would never know that there is a complex offshore structure in place because the client would be comforted by the assurance received from the overseas firm.

“In that case, how would you feel as a UK adviser if you were taken to task over not disclosing something you didn’t know about?” he said.

APN defeats

Bull hopes the government will be “careful” in how it implements the new proposals, referring to some “embarrassing” defeats of another key anti-tax avoidance system – accelerated payment notices (APNs).

Introduced in 2014, APNs enable HMRC to request full upfront payment of disputed tax within 90 days without the right of appeal. The notices were designed to combat what the UK tax office sees as ‘abusive’ tax avoidance.

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