HMRC have published their template for Trust and Company Service Providers (TCSP) returns, which sets out the information TCSPs will be required to provide in relation to beneficial ownership of offshore entities and ultimate beneficial interests in offshore partnerships, trusts and other entities. HMRC are to issue formal Notices under Schedule 23 FA 2011 (Notice) which will request certain information that TCSPs are required to hold in respect of customer due diligence under the Money Laundering Regulations 2007 (MLRs). TCSPs are under a duty to share not just information held by themselves, but also information held by their subsidiaries or third parties on their behalf.
The published template requests the following information:
As this information will be required under a formal Notice there will be no need for TCSPs to obtain their clients’ permission before sharing the information with HMRC. HMRC have advised that they are not seeking material covered by legal professional privilege (LPP) as the information being asked for will be in relation to ‘transactions’ rather than ‘advice’. However, we understand that the Law Society, having taken advice from Counsel, has advised that LPP is likely to be engaged and therefore TCSPs need to be careful not to waive privilege by sharing information with HMRC.
TCSPs can appeal to the First-tier Tribunal against providing information under a Notice on the grounds that:
As most TCSPs are likely to maintain records by client name rather than by area of advice, it may be that it will be unduly onerous to have to comply with the Notice and collate the information requested.
HMRC are able to impose financial penalties where a TCSP fails to comply with a Notice within 90 days without reasonable excuse. HMRC will also consider a financial penalty of up to £3,000 if a TCSP makes an inaccurate return, and in certain circumstances HMRC may even consider criminal investigation.
HMRC have advised that they will use the data to assess the level of risk of tax evasion, avoidance or wider criminality. This may include action being brought against any TCSPs which HMRC consider have enabled tax evasion as well as their clients. HMRC may also share this information with their Anti-Money Laundering Supervision teams who monitor TCSP compliance with the MLRs.
The information requested in TCSP returns marks HMRC’s move towards seeking greater transparency around offshore entities. The HMRC consultation ‘Tackling offshore tax evasion: A requirement to notify HMRC of offshore structures’ which closed for comments on 27 February 2017, proposes to introduce new legislation requiring any organisation setting up an offshore structure for UK taxpayers that exhibits “certain characteristics”, whether in the UK and overseas, to notify HMRC of the creation of these arrangements and of any clients using them. HMRC will review the responses to the consultation to develop a framework for implementation including detailed policy design.
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