The International Tax Compliance (Client Notification) Regulations 2016

EXPLANATORY NOTE

(This note is not part of the Regulations)

These Regulations amend the International Tax Compliance Regulations 2015 (S.I. 2015/878) to require financial institutions and other advisers to notify their clients about information that Her Majesty’s Revenue and Customs will receive under international agreements to improve tax compliance and to remind those clients about their tax obligations.

The Regulations apply to financial institutions and to individuals and companies who, as part of their business, provide advice or services to individuals relating to offshore accounts, income or assets.

Financial institutions are required to identify individuals to whom notifications in the form prescribed by the regulations must be sent by such institutions on or before 31st August 2017. The individuals concerned are those reasonably believed by the financial institution to be resident in the UK for income tax purposes for the tax years 2015-16 or 2016-17 and holding an account with the institution on 30th September 2016 where either that account is a high value account (exceeding $1m) or where, in the relevant period, the individual held certain offshore accounts with the institution (or were referred by it to another financial institution for such an account to be provided).

Other advisers are required to use either the “general approach” or the “specific approach” to identify individuals to whom the prescribed notifications described must be sent. The general approach identifies individuals who were provided with any advice or services relating to their personal tax affairs by the adviser in the relevant period. The specific approach identifies individuals who, in that period, were provided with offshore advice or services relating to such tax matters or were referred by the adviser to a connected person outside the United Kingdom for the provision of such advice or services. Both approaches exclude individuals the adviser reasonably believes were not (or will not be) resident in the United Kingdom for the tax years 2015-16 and 2016-17 or for whom, on 30th September 2016, the adviser has no reasonable expectation of advising further or providing more services. The specific approach similarly excludes individuals for whom the adviser has prepared and delivered (or expects to do so) a personal tax return disclosing the effect of the advice or services provided. An individual identified using the general approach may be similarly excluded if the adviser so chooses.

Financial institutions or advisers controlling similar businesses overseas are required to take all steps as are reasonably open to them to ensure that individuals reasonably believed by the overseas business to have been resident in the United Kingdom during the relevant period and who have been provided with accounts in certain overseas jurisdictions or with offshore advice or services relating to personal tax matters are similarly notified in the form prescribed.

The Regulations also provide a penalty of £3,000 for failing to comply with the obligations they impose. This penalty must be assessed within the period of 12 months beginning with the date on which the failure first came to the attention of an officer of Revenue and Customs or, in any event, within 6 years. Penalties for other breaches of the International Tax Compliance Regulations 2015 are unchanged.

A Tax Information and Impact Note covering this instrument was published on 8th July 2015 alongside the Finance Bill 2015 and is available on the website at https://www.gov.uk/government/collections/tax-information-and-impact-notes-tiins. It remains an accurate summary of the impacts that apply to this instrument.