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31 August 2017 – A key date for the diary

31 August 2017 – A key date for the diary

A reminder to all tax advisors or financial institutions, that they must write to their clients on or before 31 August 2017 to advise that HMRC will shortly start receiving financial information regarding UK residents from overseas jurisdictions via the Common Reporting Standard.  This is with a view to ‘improving tax compliance’.

Advisors are also required to remind clients about their obligations as UK taxpayers, for example making a disclosure of any taxable overseas income and gains.

Advisors that do not meet these requirements will be liable to pay a penalty of £3,000.

The above obligations are in line with the International Tax Compliance (Client Notification) Regulations 2016, that came into force on 30 September 2016.

Advisors are required to write to clients in a prescribed manner set out by HMRC. Guidance on this can be found via HMRC’s website here. It is essential that advisors follow the relevant prescribed format for them.

Advisors have a choice in how to identify the clients they must write to, being either a “general approach” or a “specific approach”.

The “general approach” requires identification of all individual clients who were provided with any advice or services relating to their personal tax affairs by the advisor at any time in the year ended 30 September 2016, whether or not the advice or service related to offshore matters.

The “specific approach” requires identification of all clients who, in that period, were provided with advice or services relating to offshore tax matters, or were referred by the advisor to a connected person outside the UK for the provision of such advice or services.

However, where advisors reasonably believe that clients were not resident in the UK for the tax years 2015/16 and 2016/17 or for whom, on 30th September 2016, they had no reasonable expectation of advising further or providing more services, clients can be excluded from notification.

The information that HMRC will receive as a result of the Common Reporting Standard means it is essential that clients regularise their overseas tax affairs if they have not already done so.  Any undeclared tax liabilities arising in relation to overseas assets and structures that are not reported to HM Revenue & Customs by 30 September 2018 will attract a starting penalty of 200% under new “failure to correct” legislation.

Please contact us if you would like to discuss any aspects of reviewing offshore assets and structures.