Accountants who give advice regarding offshore assets or income will be required to send a HMRC letter to individual clients who received that advice.
This requirement has been imposed by F(no.2)A 2015, s 50: International agreements to improve compliance: client notification, with the detail prescribed by regulations. The article Accountants forced to send HMRC letters to clients was based on the first draft of those regulations, which generated a lot of feedback to the professional bodies and directly to HMRC.
It appears that HMRC is listening to the practical concerns raised, as the latest version of the draft regulations and guidance restricts the scope of the audience for the HMRC letters. Accountants who provide offshore advice or services to clients that relates to the preparation and delivery of the individual client’s tax return won’t have to send the HMRC letters to those particular clients.
If a UK resident individual lets a property in Palm Springs USA, their accountant will advise them to report that rental income on the foreign pages of their UK tax return. Because the rental income is reported on the UK tax return, the accountant is exempt from the obligation to send an HMRC letter to that client.
Accountants who give wider advice about offshore assets or income, which isn’t reflected in the individual’s tax return, may have an obligation under F(no.2)A 2015, s 50.
For example a tax adviser who provides inheritance tax planning advice concerning assets located offshore will be required to write to each recipient of that advice. The current proposals are that the accountant must send a personally addressed letter to those individuals who were both clients on 30 June 2016, and tax resident in the UK in 2015/16.
If you have further questions about the requirement to send HMRC letters to clients please contact your professional body. Most accountancy and tax bodies have been given access to the draft letters, regulations and guidance, but those documents have not been released publically.
The CIOT stated on its website: “Although we would have liked to have published these documents on our website, we have been asked by HMRC only to publish them on a trusted stakeholder basis. We are therefore currently consulting with our volunteer members.
“Please rest assured that the CIOT is in discussion with HMRC about these measures and will be responding to the informal consultation by the deadline of 22 April.”
About Rebecca Cave
Consulting tax editor for Accountingweb.co.uk. I also co-author several annual tax books for Bloomsbury Professional and write newsletters for other publishers.