Tax advisers’ obligations under the Common Reporting Standard (CRS)
Recently, the government made changes to international tax compliance regulations. These created an obligation on tax advisers to tell clients:
- that HMRC will soon be getting data on overseas financial accounts
- that there are opportunities to come forward about individuals’ overseas tax affairs, if it is required
- about what could happen to those who don’t come forward
Background to the notifications
Globalisation of the financial sector now makes it much easier for individuals to hold money and assets outside of their country of residence. The UK is party to a number of international agreements designed to provide tax administrations with details of financial accounts and assets, owned by individuals that are resident for tax purposes in one country, but which are held by financial institutions in another country.
For this to work, the UK government has introduced legislation that imposes obligations on the UK financial sector to review and collect details of accounts held by persons that are tax resident elsewhere. These details must be reported to HMRC for onward transmission under the exchange of information articles in the various treaties and conventions to which the UK is party. In return, those countries supply HMRC with similar information on UK tax resident individuals holding accounts with their financial institutions.
What do you need to do?
Under the legislation, certain advisers (broadly, those who have advised clients in respect of overseas assets or income) are obliged to make clients aware of the CRS, the availability of voluntary disclosure facilities and what could happen to those with unpaid taxes connected to overseas assets who do not come forward. Whilst the regulations require notification to be given only to clients to whom you have provided offshore advice or services at any time during the year to 30 September 2016, it is acceptable (and may be administratively easier) to issue the letter to all tax clients for whom you have acted.
The notification letter (or email, if that is how you usually communicate with the client) must include a form of words which is specified by the regulations, together with a ‘Notification Document’ prepared by HMRC and must be sent by 31 August 2017. Failure to make the required notification brings with it a penalty of £3,000. Further details of the required content can be found here.
What if your clients are not confident that their tax affairs are in order?
We hope that the letter will not disclose any skeletons in your clients’ closets. But if it does and you would value a second opinion on how to proceed, please feel free to contact Doug Sinclair (Partner, Tax Investigations & Disclosures) to discuss most appropriate methodology for regularising matters. You can find his details on the right of this page.