Autumn Statement 2016: Consultation: requirement to register offshore structures

The Government will consult on a new legal requirement for intermediaries (tax advisers, banks and fiduciaries) that arrange overseas structures for clients to notify HMRC of the structures and provide details of the related clients.

The legislation will require professionals to notify HMRC of new overseas trusts, companies and legal entities, with the aim of making it easier to police the UK tax position. This will presumably underpin the information provided by jurisdictions that have signed up to the Common Reporting Standard and provide HMRC with information on alternative low tax jurisdictions that are used for new structures.

While the proposal will hopefully prevent money laundering, it will also make it very difficult for wealthy individuals to retain their privacy. We have a right to private and family life and this new power will potentially intrude on this.

In view of the fact that until now HMRC have only been able to react to information received on overseas structures. The new legislation will enable them to identify risk areas and prepare arguments and legislation against various structures if they can show that the main purpose of the structure is tax avoidance. Any future legislation in respect of offshore structures is therefore likely to be based on the type of structure that HMRC believe shields the most UK tax.

Clients will need to make sure that structures are not set up contrary to tax avoidance legislation. Whether in the consultation it will be possible to argue that the proposed legislation contravenes the “right to privacy” remains to be seen.