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HMRC to demand offshore entity disclosure

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The Law Society has announced that firms which advise clients on the establishment of offshore companies or trusts may shortly receive a letter from HMRC seeking information about beneficial ownership or interests. The letter will precede a formal notice, issued under HMRC’s data gathering powers in Finance Act 2011 Sch 23, which is likely to follow no less than two weeks later. The Law Society states: ‘It is likely to be rare for UK-based solicitors to establish offshore companies or trusts, and that where solicitors are consulted to advise in relation to the establishment of such trusts, they may not necessarily be aware of the identity of the relevant beneficial owners.’

According to the Law Society, HMRC will ask for:

  • the name and address of any client seeking to create an offshore entity;
  • details of the offshore entity, such as name, jurisdiction and date of registration; and
  • details of persons with beneficial ownership or interest in the entity and the nature of the benefit or interest.

HMRC has confirmed to the Law Society that it is not seeking material that is covered by legal professional privilege (LPP); and it takes the view that the information it is requesting is not covered by LPP because it relates to transactions which, unlike advice, are generally not covered by LPP. The Law Society disagrees, having taken advice from counsel, as legal advice may have been sought and given in the context of the matter, meaning that LPP could well be engaged.

The Law Society notes that it is ‘a matter of settled law that when a balance is to be struck between competing public interests, predominance is to be given to legal professional privilege’. A well-founded claim to LPP could, in the Law Society’s view, provide a reasonable excuse for refusing to comply with the notice.

The Law Society would like to hear from any firm which receives such a letter or notice. See http://bit.ly/2k0Av3z.

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