The Government has proposed toughening up the oversight of financial products used to reduce tax liabilities and schemes used to reduce employment taxes, including forcing advisers to disclose any clients using them.
Under the proposals, published this week, stronger client list reporting standards, including disclosure of end users, could be mandated or HM Revenue & Customs could be given the power to require more information on those using schemes that meet the Disclosure of Tax Avoidance Scheme rules. Currently, client disclosure only requires the number and type of clients, not individual identification.
Products delivering a tax-efficiency that would not arise but for their use will become eligible for disclosure. The current standard is that the product must contribute a “significant degree” of the tax advantage. HMRC says this is too narrow and can be hard to prove.
Products that will face this test include loans, derivatives, securities sale and repurchases, stock-lending agreements, shares, arrangements which produce returns “economically equivalent to interest”, collective investment schemes and alternative investment funds.
Tax schemes involving employers paying staff through third parties will also be disclosable.
Cambourne Financial Planning director Mark Loydall says: “A few advisers specialise in these kind of schemes but for most this will probably not affect them. Advisers who want to exist on the fringes will continue to exist, the cleverer the legislation becomes the cleverer they become.”