ICAS responds to the HMRC on Draft Regulations and Guidance for the Tax Adviser Notification Requirement

By Susan Cattell, Head of Taxation (England and Wales)

22 February 2016

Susan Cattell outlines the ICAS response and highlights some areas of concern and issues which need clarification.

The regulations will require financial institutions and relevant persons (including tax agents and financial and tax advisers) to write to certain clients and former clients to whom they have provided offshore advice and services.

Clients will have to be notified about HMRC’s new sources of information on offshore accounts, the opportunities to come forward and make disclosure of offshore matters, and the consequences for those who don’t do so. The draft guidance is for those who will have to issue the notifications and for recipients.

As discussed here, this was an informal consultation with an unacceptably short timeframe. The consultation on the original proposals in 2015, to which ICAS also responded, was similarly informal. Many of those who will shortly be affected may therefore be unaware of their responsibilities. ICAS suggested last year that HMRC should make the notifications; this approach has not been adopted so it is important that HMRC now sets out how it intends to publicise the requirement to those affected.

Impact on client relationships

ICAS is concerned that requiring tax advisers to notify their clients could have a serious adverse impact on client/adviser relationships. Many clients receiving the notifications will not have anything to disclose and will be upset and/or angry at the apparent implication from their adviser or former adviser that they have been taking part in tax evasion Some clients may be distressed because they receive multiple notifications from current and former advisers and from the different types of advisers and institutions affected by the requirement.

ICAS stressed the importance of the wording of the notification, which is to be an HMRC branded document accompanied by a covering letter. It is vital that this is designed to minimise the adverse impact on client relationships and possible distress to recipients. It is therefore disappointing that no draft wording is yet available. The notification period will begin in April 2016 so once the proposed wording is issued there will again be an unacceptably short time for ICAS and other professional bodies to seek the views of members.

HMRC also now propose to require advisers to include certain mandatory wording in the covering letter sent with the notifications. Again no draft wording has yet been made available but we believe it is essential that advisers are able to make clear, if they wish to do so, that the mandatory wording included in the covering letter is not their own and is being included because of the statutory requirement.

Costs for advisers

ICAS expressed concern last year that the requirement will impose considerable costs on advisers, both financial and in terms of time.   In addition to the cost of issuing the notifications, considerable time will also be taken up dealing with concerned and upset clients, many of whom will have nothing to disclose.

No attempt appears to have been made to address these issues, other than placing a limit on the number of former clients who need to be notified. It is also surprising that the default position is issuing notifications on paper by post which is clearly more expensive than email.

This is hard to reconcile with HMRC’s approach in other areas which is to compel people to use digital mechanisms. The cost will be further increased because a standard covering letter cannot be used – the guidance states that the letter should include ‘the name and address of the customer and be written to them’. We have suggested that these aspects of the notification process should be reconsidered and that serious attempts should be made to reduce the cost burden for advisers.

Clarifications required

The ICAS response seeks clarification from HMRC on a number of issues:

  • It is envisaged that some advisers may wish to deliver the notification and covering letter to clients by hand – for example by handing it to the client in a regular meeting. The draft regulation suggests that this would be an acceptable method of delivery as it refers to the notification being ‘sent or supplied in a paper copy. However the draft guidance appears to indicate that the paper copies must be sent by post. Confirmation that delivery by hand will be acceptable has been sought and the response also suggests that this option should be specifically mentioned in the guidance.
  • The draft regulation refers to ‘individuals’ so presumably executors and trustees are excluded but we have asked for confirmation that this is the case.
  • Clarification has also been requested on scenarios where:
    • an adviser has worked for a company but as part of that work has given offshore advice to employees or shareholders of the company;
    • an adviser has provided payroll services to a company which has some internationally mobile employees .
    It seems that in these situations notifications should not be required because the client is the company rather than the individual shareholders and employees but again confirmation has been requested.
  • Finally clarification has been sought on the application of the penalty regime for failure to make the required notifications.

The full ICAS response to the informal consultation is available to download.


  • Tax

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