HMRC recently held an informal consultation on the draft regulations and guidance that sit alongside the measure contained in section 50 of the Finance (No. 2) Act 2015. That section imposes obligations on advisers providing “offshore advice” to clients, to send an individually addressed covering letter from the adviser’s firm which must include certain wording provided by HMRC; the letter must also enclose a HMRC branded letter.

The correspondence is intended to alert clients to the possibility of HMRC compliance intervention in the event of untaxed moneys being held abroad.

The consultation was not an open consultation, in that only the major professional bodies representing the interests of tax agents (including this Institute) were asked for comment.

In its response, the Northern Ireland Tax Committee pointed out a number of practical difficulties and concerns about this requirement, including:

• requiring an adviser to send a letter on the advisers headed paper which has largely been authored by HMRC could be viewed as a breach of the adviser’s professional independence
• the requirement for the letter to be in paper format and sent by post directly conflicts with HMRC’s digital strategy. It would make more sense to send the communication direct to individuals using their personal tax account. This removes the potential cost and disruption to agents that the measure will create
• the relationship between the client and agent is covered by a letter of engagement which defines their legal relationship. There is no such letter of engagement between the adviser and HMRC
• many advisers already suffer fee pressure from clients. This obligation will simply fall into the category of work that either cannot be billed or for which the client is not willing to pay
• the draft guidance does not make clear the precise definition of “specified client”. The definition of “offshore advice or services” appears to be very wide
• the covering letter must include certain wording that HMRC will set out and the letter must also enclose a HMRC branded letter which will be available to download from gov.uk. These aspects of the measure are vitally important and should be available for discussion and consultation before the regulations are implemented
• the proposed measure appears to go beyond the requirement to notify individual reportable persons as per the Common Reporting Standard
• a full consultation should be held to explore the many and varied issues raised by this measure.

The committee also highlighted issues in relation to the administration and monitoring of this requirement. You can read the committee’s response here.