The UK Client Notification Regulations – what is your obligation?

The UK Client Notification Regulations came into force on 30 September 2016 and the obligation for practitioners to notify any clients with offshore accounts and assets must be met by 31 August 2017.

The objective of the Regulations is to ensure that clients have advance warning that HMRC will soon begin to automatically receive data from over 100 jurisdictions relating to UK tax residents and their offshore accounts, in accordance with the UK’s Automatic Exchange of Information (AEOI) agreements.

Financial institutions that provide offshore advice (‘Specified Financial Institutions’ – SFIs) and practitioners who provide clients with advice or services relating to offshore income or assets (‘Specified Relevant Persons’ – SRPs) that is not disclosed in their clients’ tax returns are required to send each of their clients a Client Notification Letter advising them that their offshore tax information will be shared with HMRC under the Common Reporting Standard (CRS).

The notifications are only applicable to individuals and there is no obligation to notify companies or trusts.

There is a flat-rate penalty of GBP3,000 per SRP or SFI for not complying with the notification requirements.

SRP obligations

HMRC advises that if you are an SRP there are two options that you may wish to consider when identifying the relevant clients:

  1. To notify all of your clients for whom you have not submitted a return, or
  2. To specifically target the clients to whom you have provided offshore advice or services or referred offshore advice or services.

SFI obligations

If you are a financial institution that maintains an offshore account for an individual or have referred clients to a financial institution, wherever located, for the purpose of opening an offshore account you will need to send notifications. The two options in this connection are:

  1. Notify all account holders who have an account balance in excess of USD1 million in the UK, or
  2. Notify all account holders who are tax resident in the UK for whom the SFI maintains a financial account overseas, or who they refer to another financial institution to provide an overseas account.

Further information and guidance on what needs to be included with your notification letter is available here.

The HMRC-branded Client Notification Letter is available here.

We have been informed that the HMRC team will be happy to take queries in this connection at [email protected] and [email protected].

See my earlier Blog of 14 September 2016 for further information on the International Tax Compliance (Client Notification) Regulations.

Emily Deane TEP, STEP Technical Counsel

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