2016 No. 899
Taxes
The International Tax Compliance (Client Notification) Regulations 2016
Made 8th September 2016
Laid before the House of Commons 9th September 2016
Coming into force 30th September 2016

These Regulations are made by the Treasury in exercise of the powers conferred by section 222(1), (2), (2A), (2B) and (3) of the Finance Act 2013.
2013 c. 29; subsections (2) and (4) were amended, and subsections (2A) and (2B) were inserted, by section 50 of the Finance (No. 2) Act 2015 (c. 33).

1 Citation and commencement
These Regulations may be cited as the International Tax Compliance (Client Notification) Regulations 2016 and come into force on 30th September 2016.

Client exchange of tax information notifications
2 The International Tax Compliance Regulations 2015 are amended as follows.
S.I. 2015/878, amended by S.I. 2015/1839.
3 After regulation 12, insert—

“Client notification obligations

12A Interpretation of regulations 12A to 12F
1 In this regulation and regulations 12B to 12F—
“connected person” means a person connected with the specified financial institution, specified relevant person or relevant person in question within the meaning of “connected” given in section 1122 of CTA 2010;
“officer”, in relation to a specified relevant person or a connected person, includes—
(i) where a person is a body corporate, a director, manager or secretary;
(ii) where a person is a partnership, a partner.
“offshore advice or services” has the meaning given in paragraph (2);
“overseas person” means a person who would be a specified financial institution or specified relevant person if they carried on business in the United Kingdom;
“relevant period” means the period of one year ending with 30th September 2016;
“specified client” means an individual who is identified—
(i) as a specified client of a specified financial institution under regulation 12B, or
(ii) as a specified client of a specified relevant person under regulation 12C;
“specified financial institution” has the meaning given in paragraph (3);
“specified relevant person” has the meaning given in paragraph (4).
2010 c. 4.
2 “Offshore advice or services” means advice or services relating to—
(a) a financial account in a participating jurisdiction or the United States of America;
(b) a source of relevant foreign income, as defined by section 830 of ITTOIA 2005, arising from a participating jurisdiction or the United States of America;
2005 c. 5; section 830(1) and (2) was amended by paragraph 51 of Schedule 7 to the Finance Act 2008 (c. 9). Section 830(4) was amended by paragraphs 156 and 162 of Schedule 7 to the Finance Act 2008 and by S.I. 2009/3001.
(c) a source of employment income, as defined by section 7(2) of ITEPA 2003, arising from a participating jurisdiction or the United States of America;
2003 c. 1.
(d) an asset, as defined by section 21 of TCGA 1992, which is held or situated in a participating jurisdiction or the United States of America.
1992 c. 12; section 21(1)(b) was amended by paragraph 9 of Schedule 12 to the Finance Act 2006 (c. 25).
3 “Specified financial institution” means a financial institution under the DAC or the CRS, unless that financial institution is—
(a) a non-reporting financial institution under the DAC or the CRS, or
(b) a financial institution that, if it was an NFE, would be an active NFE under Section VIII(D)(8)(h) of Annex I to the DAC or Section VIII(D)(9)(h) of the CRS (organisations with charitable or other non-profit purposes).
4 “Specified relevant person” means a relevant person who, in the relevant period, has—
(a) provided offshore advice or services in the course of business, or
(b) referred an individual to a connected person outside the United Kingdom for the provision of advice or services relating to the individual’s personal tax affairs.
“Relevant person” is defined in section 222(4) of the Finance Act 2013, as amended by section 50 of the Finance (No. 2) Act 2015.
5 For the purpose of determining whether a person is a specified relevant person—
(a) offshore advice or services must be disregarded if—
(i) they were provided to an individual by the relevant person only in connection with the preparation and delivery on behalf of that individual of returns and accounts, statements and documents required under section 8 of TMA 1970,
1970 c. 9; section 8 was substituted by section 90(1) of the Finance Act 1990 (c. 29) and amended by section 178(1) of the Finance Act 1994 (c. 9), section 104(2) and (3) of the Finance Act 1995 (c. 4), section 121(1) and (3) of the Finance Act 1996 (c. 8), paragraph 359 of Schedule 1 to the Income Tax (Trading and Other Income) Act 2005 (c.5), section 88 of, and Part 5(3) of Schedule 27 to, the Finance Act 2007 (c. 11), paragraph 9 of Schedule 19 to the Finance Act 2009 (c. 10) and paragraph 12 of Schedule 7 to the Taxation (International and Other Provisions) Act 2010 (c. 8).
(ii) they were provided to an employee or officer of the relevant person, or
(iii) they were provided to an employee or officer of a connected person;
(b) a referral must be disregarded if—
(i) the individual was an employee or officer of the relevant person, or
(ii) the individual was an employee or officer of a connected person.
6 Where a specified financial institution is also a specified relevant person, regulations 12B to 12F apply as if it were only a specified financial institution.

12B Identifying specified clients: specified financial institution
1 A specified financial institution must identify all of its specified clients.
2 In order to identify its specified clients, a specified financial institution must use either—
(a) the services approach set out in paragraphs (3) and (4), or
(b) the high value approach set out in paragraph (5).
3 An individual is a specified client of a specified financial institution under the services approach if—
(a) the specified financial institution reasonably believes that the individual was resident in the United Kingdom for income tax purposes for the tax year 2015-16 or will be so resident for the tax year 2016-17,
(b) the individual is an account holder with the specified financial institution on 30th September 2016, and
(c) in any part of the relevant period, the specified financial institution has—
(i) maintained a financial account in a participating jurisdiction or the United States of America in relation to which the individual is an account holder, or
(ii) referred the individual to another specified financial institution (wherever located) for the other specified financial institution to provide a financial account for the individual in a participating jurisdiction or the United States of America.
4 In paragraph (3)(c)(i), “financial account” does not include a financial account which the specified financial institution is prevented by legal or regulatory obligations in force on 30th September 2016 from providing as a new account.
5 An individual is a specified client of a specified financial institution under the high value approach if—
(a) the specified financial institution reasonably believes that the individual was resident in the United Kingdom for income tax purposes for the tax year 2015-16 or will be so resident for the tax year 2016-17, and
(b) the individual is an account holder of a high value account maintained by the specified financial institution on 30th September 2016.

12C Identifying specified clients: specified relevant person
1 A specified relevant person must identify all of that person’s specified clients.
2 In order to identify its specified clients, a specified relevant person must use either—
(a) the specific approach set out in paragraphs (3) and (4), or
(b) the general approach set out in paragraphs (5) and (6).
3 An individual is a specified client of a specified relevant person under the specific approach if—
(a) at any time in the relevant period, the specified relevant person has—
(i) provided the individual with offshore advice or services relating to the individual’s personal tax affairs, or
(ii) referred the individual to a connected person outside the United Kingdom for the provision of such advice or services, and
(b) paragraph (4) does not apply to the individual.
4 This paragraph applies to an individual if—
(a) the specified relevant person reasonably believes that the individual was not resident in the United Kingdom for income tax purposes for the tax year 2015-16 and will not be so resident for the tax year 2016-17,
(b) on 30th September 2016 the specified relevant person has no reasonable expectation of providing further advice or services to the individual, or
(c) the specified relevant person has prepared and delivered, or reasonably expects to prepare and deliver, a return under section 8 of TMA 1970 on behalf of the individual disclosing the effect of the offshore advice or services referred to in paragraph (3)(a).
5 An individual is a specified client of a specified relevant person under the general approach if—
(a) the specified relevant person has provided the individual with any advice or services relating to the individual’s personal tax affairs in the relevant period, and
(b) paragraph (6) does not apply to the individual.
6 This paragraph applies to an individual if—
(a) the specified relevant person reasonably believes that the individual was not resident in the United Kingdom for income tax purposes for the tax year 2015-16 and will not be so resident for the tax year 2016-17, or
(b) on 30th September 2016 the specified relevant person has no reasonable expectation of providing further advice or services to the individual.
7 A specified relevant person may choose to exclude an individual from being a specified client under the general approach if the specified relevant person has prepared and delivered, or reasonably expects to prepare and deliver, a return under section 8 of TMA 1970 on behalf of the individual in respect of the tax year to which the advice or services relate.

12D Client exchange of tax information notifications
1 A specified financial institution or specified relevant person must make client exchange of tax information notifications to all of its specified clients on or before 31st August 2017.
2 Paragraph (1) does not apply in relation to a specified client if—
(a) a specified financial institution or specified relevant person is aware that a connected person, who is not an overseas person, has already made a client exchange of tax information notification to that specified client, or
(b) despite maintaining proper records, a specified financial institution or specified relevant person holds insufficient information on 30th September 2016 to be able to contact the specified client.

12E Client exchange of tax information notifications: overseas persons
1 A specified financial institution or specified relevant person having control of an overseas person must take all such steps as are reasonably open to it to ensure that the overseas person makes a client exchange of tax information notification on or before 31st August 2017 to all individuals to whom paragraph (2) applies.
Section 222(4) of the Finance Act 2013, as amended by section 50 of the Finance (No. 2) Act 2015, provides that “control” is to be construed in accordance with section 1124 of the Corporation Tax Act 2010.
2 This paragraph applies to an individual who—
(a) the overseas person reasonably believes to have been resident in the United Kingdom for income tax purposes at any time in the relevant period, and
(b) either—
(i) was an account holder in relation to a financial account maintained by the overseas person in a participating jurisdiction or the United States of America in the relevant period, or
(ii) was provided with offshore advice or services relating to the individual’s personal tax affairs by the overseas person in the relevant period.

12F Making client exchange of tax information client notifications
1 A client exchange of tax information notification is made to a specified client or an individual to whom regulation 12E(2) applies if—
(a) it is in the form set out in Part 1 of Schedule 3,
(b) it is accompanied by a covering message which includes—
(i) the name of the specified client, and
(ii) the statement set out in the relevant paragraph of Part 2 of that Schedule, and
(c) it is given in accordance with paragraph (3) or (4).
2 The relevant paragraph in Part 2 of Schedule 3 is—
(a) paragraph 2 in the case of a client exchange of tax information notification made by a specified financial institution or an overseas person who would be a specified financial institution if they carried on business in the United Kingdom, or
(b) paragraph 3 in the case of a client exchange of tax information notification made by a specified relevant person or an overseas person who would be a specified relevant person if they carried on business in the United Kingdom.
3 A client exchange of tax information notification is given in accordance with this paragraph if it is sent or supplied in a paper copy.
4 A client exchange of tax information notification is given in accordance with this paragraph if it is given by email by a specified relevant person who—
(a) wholly or mainly communicated with individuals by e-mail when providing advice or services to them in the relevant period, and
(b) reasonably believes that the specified client will become aware of the content of a client exchange of tax information notification given to them by e-mail.
5 If it appears appropriate to a specified financial institution, a specified relevant person or an overseas person, the client exchange of tax information notification and covering message set out in Schedule 3 may be translated into a language other than English or produced in a Braille or audible form.”

.
4 For regulation 13 (penalties for failure to comply with Regulations), substitute—

“13 1 A person is liable to a penalty of £3,000 if the person fails to comply with any obligation under regulations 12B to 12E.
2 A person is liable to a penalty of £300 if the person fails to comply with any other obligation under these Regulations.”

.
5 In regulation 18 (assessment of penalties)—
(a) in paragraph (3), for “13” substitute “13(2)”,
(b) in paragraph (4), after “regulation” insert “13(1),”, and
(c) in paragraph (4)(a), after “inaccuracy” insert “or failure”.
6 In the table in regulation 24(2) (definitions)—
(a) after the entry for “financial institution”, insert—

“high value account		Section VIII(C)(15) of Annex I	Section VIII(C)(15) of the CRS	Section II(D) of Annex I
NFE		Section VIII(D)(6) of Annex I	Section VIII(D)(7) of the CRS	”

and,
(b) after the entry for “non-participating financial institution”, insert—

“non-reporting financial institution		Section VIII(B)(1) of Annex I	Section VIII(B)(1) of the CRS	”

7 After Schedule 2, insert—

“SCHEDULE 3
Regulation 12F
PART 1 1 The form of a client exchange of tax information notification is—
PART 2 2 The statement in this paragraph is—
“Financial institutions in more than 100 jurisdictions around the world are being legally required to find out the tax residence of their account holders and report details of their accounts, structures, trusts, and investments to be exchanged with the appropriate tax authorities. As a UK tax resident, any overseas accounts you have will be sent to HM Revenue & Customs (HMRC). This gives HMRC unprecedented levels of information to check that, as in most cases, the right tax has been paid.
If you have already declared all of your past and present income or gains to HMRC, including from overseas, you do not need to worry. But if you are in any doubt, HMRC recommends that you read the factsheet attached to help you decide now what to do next.”.
3 The statement in this paragraph is—
“From 2016, HM Revenue & Customs (HMRC) is getting an unprecedented amount of information about people’s overseas accounts, structures, trusts, and investments from more than 100 jurisdictions worldwide, thanks to agreements to increase global tax transparency. This gives HMRC unprecedented levels of information to check that, as in most cases, the right tax has been paid.
If you have already declared all of your past and present income or gains to HMRC, including from overseas, you do not need to worry. But if you are in any doubt, HMRC recommends that you read the factsheet attached to help you decide now what to do next.”

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David Evennett Andrew Griffiths Two of the Lords Commissioners of Her Majesty’s Treasury 8th September 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.