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Peer Review Report Combined: Phase 1 + Phase 2, Incorporating Phase 2 Ratings
Peer Review Report Combined: Phase 1 + Phase 2, Incorporating Phase 2 Ratings
Global Forum on Transparency and Exchange of Information for Tax Purposes Peer Reviews: United Kingdom 2013
COMBINED: PHASE 1 + PHASE 2, INCORPORATING PHASE 2 RATINGS
November 2013 (reflecting the legal and regulatory framework as at January 2013)
This work is published on the responsibility of the Secretary-General of the OECD. The opinions expressed and arguments employed herein do not necessarily reflect the official views of the OECD or of the governments of its member countries or those of the Global Forum on Transparency and Exchange of Information for Tax Purposes. This document and any map included herein are without prejudice to the status of or sovereignty over any territory, to the delimitation of international frontiers and boundaries and to the name of any territory, city or area.
Please cite this publication as: OECD (2013), Global Forum on Transparency and Exchange of Information for Tax Purposes Peer Reviews: United Kingdom 2013: Combined: Phase 1 + Phase 2, incorporating Phase 2 ratings, OECD Publishing. http://dx.doi.org/10.1787/9789264205987-en
Series: Global Forum on Transparency and Exchange of Information for Tax Purposes Peer Reviews ISSN 2219-4681 (print) ISSN 2219-469X (online)
OECD 2013
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TABLE OF CONTENTS 3
Table of Contents
About the Global Forum . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Executive Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11 Information and methodology used for the peer review of the United Kingdom .11 Overview of the United Kingdom . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 Recent developments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 Compliance with the Standards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 A. Availability of Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A.1. Ownership and identity information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A.2. Accounting records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A.3. Banking information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 23 48 56
B. Access to Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59 Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59 B.1. Competent Authoritys ability to obtain and provide information . . . . . . . . 61 B.2. Notification requirements and rights and safeguards. . . . . . . . . . . . . . . . . . 72 C. Exchanging Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75 Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . C.1. Exchange-of-information mechanisms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . C.2. Exchange-of-information mechanisms with all relevant partners . . . . . . . . C.3. Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . C.4. Rights and safeguards of taxpayers and third parties. . . . . . . . . . . . . . . . . . C.5. Timeliness of responses to requests for information . . . . . . . . . . . . . . . . . . 75 77 88 89 91 93
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4 TABLE OF CONTENTS Summary of Determinations and Factors Underlying Recommendations. . . . 99 Annex 1: Jurisdictions Response to the Report . . . . . . . . . . . . . . . . . . . . . . . . .103 Annex 2: List of Exchange of Information Mechanisms in Force . . . . . . . . . . 104 Annex 3: List of All Laws, Regulations and Other Relevant Material . . . . . . .113 Annex 4: People Interviewed During On-site Visit . . . . . . . . . . . . . . . . . . . . . .117
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EXECUTIVE SUMMARY 7
Executive Summary
1. The combined report of 2011 (the 2011 report) summarised the legal and regulatory framework for transparency and exchange of information in the United Kingdom (UK) as well as practical implementation of that framework. The international standard which is set out in the Global Forums Terms of Reference to Monitor and Review Progress Towards Transparency and Exchange of Information, is concerned with the availability of relevant information within a jurisdiction, the competent authoritys ability to gain timely access to that information, and in turn, whether that information can be effectively exchanged with its exchange of information partners. 2. As a major world economy and with one of the leading financial centres in the world (City of London), the UK has a long history in negotiating double taxation conventions (DTCs) leading to a network of agreements covering 122 jurisdictions. Further, it has negotiated taxation information exchange agreements with 22 jurisdictions, 8 of which are also covered by a DTC. This leads to a network of exchange of information agreements with 136 jurisdictions which includes all of the UKs main economic and diplomatic partners as well as financial centres. The large majority of these agreements allow the UK to exchange information to the standard. Nevertheless, the UK should continue its programme of updating the last of its older agreements. The UK is also able to exchange information under some multilateral mechanisms. 3. The UK legal environment ensures in most circumstances that the necessary ownership information is maintained for all relevant companies, partnerships, trusts and other entities and arrangements. This is in particular thanks to the registration requirements for companies and limited partnerships, anti-money laundering legislation requiring a range of service providers to conduct customer due diligence, and requirements to report information to HM Revenue and Customs for tax purposes. Nevertheless, further action should be taken to either ensure that robust mechanisms are in place to identify the owners of bearer shares or amend its legislation to eliminate such shares. The UK has recently reported that it is continuing to evaluate which measures are necessary and has not identified any changes to relevant legislation.
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8 EXECUTIVE SUMMARY
4. The UK legislation also contains provisions requiring accounting information and underlying documentation to be kept for a minimum of five years for all relevant entities and arrangements. Further, UK legislation ensures that bank information is available for all account-holders. 5. The 2011 assessment of the UK showed that it was able to access information for international exchange of information purposes where the taxpayers name was known, but identified a shortcoming where the taxpayers name was not known. By virtue of amendments made to its legal and regulatory framework through the Finance Act, 2012, the United Kingdom now has the power to obtain the taxpayers name where the requesting party has provided sufficient information to identify the taxpayer. Once the name of the taxpayer is known, the UKs established access powers will apply. Consequently, both elements B.1 and C.1 are now assessed to be in place and the Phase 1 recommendations previously made under B.1 as well as the first recommendation made under C.1 are removed. The UK has reported that since 2007, there were only two or three instances where they had to approach the Tribunal after the requesting jurisdiction had not provided the name and address of the taxpayer. The United Kingdom should nevertheless ensure that this new procedure does not create additional delays in providing requested information to those already stressed in the 2011 assessment. With its involvement in developing a very comprehensive network of 6. tax agreements, and its key position in international trade, the UK is a very active country in the field of exchange of information in tax matters, receiving approximately 1 200 (1 500 for 2010) requests a year. This volume of requests and the will of the UK authorities to provide comprehensive answers to their partners show the deep involvement of the UK in exchanging information for tax purposes. However, several peers expressed their concerns that it takes too much time to receive information in cases where a formal information notice has to be issued and approved by a Tribunal, in particular in cases regarding bank information. The UK has recently indicated that some steps that have been taken to review the process for issuance of a formal notice to obtain information with a view to ensuring that it is compatible with effective exchange of information in tax matters in this regard. However, while improvements to its EOI systems have been noted it has not been possible to verify their effectiveness as yet and peers have not yet reported improvements in response times, (See comments in C.5). 7. Most international exchange of information for direct tax purposes is dealt with by an EOI Team in the Centre for Exchange of Intelligence (CEI) within HMRCs Risk and Intelligence Service in London. The EOI team is sufficiently resourced to ensure its mission is being exercised in a good way, even considering the very large number of EOI matters it manages. Due to extensive information holdings, including access to many registers, about
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EXECUTIVE SUMMARY 9
half the responses to international requests for information in tax matters are provided by the competent authority without needing to exercise information gathering powers. 8. Notwithstanding the need to strengthen some areas of the UK system, all 22 of the UKs peers that provided detailed comments indicate that the UK is a very important and, notwithstanding some imperfections, a very good EOI partner. The UK is committed to the international standards of transparency and exchange of information for tax purposes, actively exchanging information for international tax matters with a large network of jurisdictions across the globe. 9. The United Kingom has been assigned a rating 1 for each of the 10 essential elements as well as an overall rating. The ratings for the essential elements are based on the analysis in the text of the report, taking into account the Phase 1 determinations and any recommendations made in respect of the UKs legal and regulatory framework and the effectiveness of its exchange of information in practice. On this basis, the UK has been assigned the following ratings: Compliant for elements A.2, A.3, B.2, C.1, C.2, C.3 and C.4, and Largely Compliant for elements A.1, B.1, and C.5. In view of the ratings for each of the essential elements taken in their entirety, the overall rating for the UK is Largely Compliant. 10. The UK is encouraged to continue to make improvements to its EOI framework and system for the exchange of information in practice to address any outstanding Phase 1 and Phase 2 recommendations, and to provide a follow-up report one year after the present report is adopted by the Global Forum.
1.
This report reflects the legal and regulatory framework as at the date indicated on page 1 of this publication. Any material changes to the circumstances affecting the ratings may be included in Annex 1 to this report.
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INTRODUCTION 11
Introduction
Information and methodology used for the peer review of the United Kingdom
11. The assessment of the legal and regulatory framework of the United Kingdom (UK) and the practical implementation and effectiveness of this framework in th 2011 report and the supplementary report was based on the international standards for transparency and exchange of information as described in the Global Forums Terms of Reference to Monitor and Review Progress Towards Transparency and Exchange of Information For Tax Purposes and was prepared using the Global Forums Methodology for Peer Reviews and Non-Member Reviews. The assessment in the 2011 report was based on the laws, regulations, and exchange of information mechanisms in force or effect as at June 2011, other information, explanations and materials supplied by the UK during and after the on-site visit that took place on 7 to 11 February 2011, and information supplied by partner jurisdictions. During the on-site visit, the assessment team met with officials and representatives of the relevant UK public agencies including HM Treasury; HM Revenue & Customs (HMRC); Financial Services Authority (FSA); Companies House; Department for Business, Innovation and Skills (BIS), Office of the Third Sector (Cabinet Office) and Charity Commission for England and Wales (see Annex 4). The Supplementary Report of the United Kingdom was prepared pur12. suant to paragraph 58 of the Global Forums Methodology and was adopted in April 2013. The supplementary report was based on information available to the assessment team including the laws, regulations, and exchange of information arrangements in force or effect as at January 2013, and information supplied by the United Kingdom. The following analysis reflects the integrated, 2011 report and Supplementary Report of the legal and regulatory framework of the United Kingdom as at January 2013. 13. The Terms of Reference break down the standards of transparency and exchange of information into 10 essential elements and 31 enumerated aspects under three broad categories: (A) availability of information;
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12 INTRODUCTION
(B) access to information; and (C) exchanging information. This review assesses the United Kingdoms legal and regulatory framework and the implementation and effectiveness of this framework against these elements and each of the enumerated aspects. In respect of each essential element a determination is made regarding the UKs legal and regulatory framework that either: (i) the element is in place, (ii) the element is in place but certain aspects of the legal implementation of the element need improvement, or (iii) the element is not in place. These determinations are accompanied by recommendations for improvement where relevant. In addition, to reflect the Phase 2 component, recommendations are made concerning the UKs practical application of each of the essential elements and a rating of either: (i) compliant, (ii) largely compliant, (iii) partially compliant, or (iv) noncompliant is assigned to each element. An overall rating is also assigned to reflect the UKs overall level of compliance with the standards. 14. The assessment for the 2011 report was conducted by an assessment team composed of two expert assessors and two representatives of the Global Forum Secretariat: Yanga Mputa, Deputy Director with the South African Revenue Service; Koki Harada, Deputy Director with the Japanese Ministry of Finance; as well as Beat Gisler from the Global Forum Secretariat. 15. The assessment for the supplementary report was conducted by an assessment team, which consisted of two expert assessors and two representatives of the Global Forum Secretariat: Ms. Yanga Mputa, Deputy Director, South African Revenue Service; Mr. Junya Toya, Deputy Director, International Operations Division, National Tax Agency, Japan; Mr. Remi Verneau and Mr. Bhaskar Goswami from the Global Forum Secretariat. The assessment team assessed the legal and regulatory framework for transparency and exchange of information and relevant exchange of information mechanisms in the UK. 16. The ratings assigned in this report were adopted by the Global Forum in November 2013 as part of a comparative exercise designed to ensure the consistency of the results. An expert team of assessors was selected to propose ratings for a representative subset of 50 jurisdictions. Consequently, the assessment teams that carried out the Phase 1 and Phase 2 reviews were not involved in the assignment of ratings. These ratings have been compared with the ratings assigned to other jurisdictions for each of the essential elements to ensure a consistent and comprehensive approach. The assignment of ratings was also conducted at a different time from those reviews, and the circumstances may have changed in the meantime. Readers should consult Annex 1 for information on changes that have occurred.
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INTRODUCTION 13
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14 INTRODUCTION
20. The UK has a bicameral Parliament that consists of the House of Commons (650 seats; members elected by popular vote to serve five-year terms unless the House is dissolved earlier) and the House of Lords (792 members; consisting of 678 life peers, 89 hereditary peers, and 25 clergy 7). The House of Lords (the upper house) has no legislative power in relation to tax or other money bills. Any Bill passed by the parliament requires Royal Assent (signature of the monarch) to become law. The UK parliament is the ultimate legislative authority in the United Kingdom. The devolved, unicameral parliament in Scotland and devolved assemblies in Northern Ireland, and Wales are not sovereign bodies and could be abolished by the UK parliament. 21. The Prime Minister and Cabinet are formally appointed by the Monarch to form Her Majestys Government, though the Prime Minister chooses the Cabinet. Northern Ireland, Scotland and Wales each have their own government or Executive, led by a First Minister. England, the largest country of the United Kingdom, has no devolved executive and is administered directly by the UK government and parliament on all issues. All parts of the UK also have elected local authorities.
Legal system
22. The UK does not have a single legal system since it was created by the political union of previously independent countries. Today the UK has three systems of law each having its own court system and legal profession: England and Wales, Scotland, and Northern Ireland. The systems in England, Wales and Northern Ireland, are based on common-law principles while the Scottish legal system is a hybrid of common-law and civil-law principles. There is no written (codified) constitution. The constitution thus consists mostly of a collection of disparate written sources, including statutes, judgemade case law, and international treaties. There is no technical difference between ordinary statutes and constitutional law. To remove any possibility of conflict in the case of a tax treaty, the texts of such treaties are incorporated into UK domestic law and the specific UK legislation that achieves this states that the provisions of the agreement shall have effect notwithstanding any other enactment. Secondary legislation is made in the form of statutory instruments, most commonly Orders in Council, regulations, rules and orders, which are issued by parliament followed by approval by her Majesty by Order in Council or approval by a Minister of the Crown. 8
7. 8. As of 1 March 2011. Parliament of the United Kingdom website, MPs, Lords and Offices, www.parliament.uk/mps-lords-and-offices/lords/lords-by-type-and-party/. When referring to acts, regulations and schedules the references section, regulation and paragraph are used respectively. The same convention is applied in this report.
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INTRODUCTION 15
23. The implementation of EU legislation is based on s. 2(1) of the European Communities Act 1972. Based on this law, European law is considered to be a valid and binding source of UK law. Where European law exists on a particular subject, it can override any inconsistent UK law, including Acts of Parliament. Section 2(2) provides a general power for further implementation of EU obligations by means of secondary legislation. 24. The following steps have to be taken to bring a signed DTC or TIEA into force: The arrangement is scheduled to a draft Order in Council (secondary legislation), which is laid before the House of Commons (the lower House of the UK parliament). Once the House of Commons has approved the order in draft, it is transmitted for approval by her Majesty by Order in Council. Once the Order is made, the arrangement becomes law in the UK.
Taxation system
25. Taxation in the UK is split between central and local government. Central government tax revenues come primarily from a mixture of taxes on income, capital gains and consumption. The majority of national taxes, including income tax and VAT, as well as national insurance contributions are administered and collected by Her Majestys Revenue and Customs (HMRC), a government department accountable to the Chancellor of the Exchequer. The Commissioners for HMRC are the UK competent authority for the purposes of exchange of information under tax treaties, including double taxation conventions (DTCs) and taxation information exchange agreements (TIEAs) which are given effect for EOI purposes through s. 173 of Finance Act 2006. Under the UKs tax system, liability to pay taxes on income and capi26. tal gains is primarily determined by residence status. UK resident companies and the vast majority of UK resident individuals are liable to tax on their worldwide income and gains wherever they arise. Further, UK source income is generally subject to UK taxation regardless of the place of residence. For individuals, residence in part depends on the amount of time an individual spends in the UK. A small minority of individuals (who are UK resident, but not UK domiciled, or not ordinarily resident in the UK) can elect to be taxed under the remittance basis which means their foreign source income and gains are only taxed when remitted to the UK. For companies, UK residence applies if a company is UK-incorporated or if its central management and control are in the UK. 27. For the majority of UK taxpayers, income tax is collected in full by their employer or pension provider through the Pay As You Earn (PAYE) system or, in the case of savings income, the tax due is deducted and accounted for at source in the case of interest or covered by a tax credit in the case of dividends. For individuals whose income tax liabilities are not covered
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16 INTRODUCTION
by PAYE, deducted at source, or covered by a tax credit, the UK operates a self-assessment tax regime, which includes rules on notifying liability to tax and obligations to complete a tax return when asked to do so by HMRC. 28. In tax matters, independent tribunals play an important role. Appeals in particular cases are heard in the first instance in the First Tier Tribunal, which also considers applications by HMRC to use certain statutory powers to obtain information. Appeals will proceed to the Upper Tribunal, followed by the Court of Appeal or Court of Sessions (Scotland) and finally the Supreme Court, which is the ultimate judicial authority in the UK.
Overview of commercial laws and other relevant factors for exchange of information
29. The Companies Act 2006 (Companies Act) forms the primary source of UK company law and governs the formation and regulation of companies. The act also codifies some existing common law principles, such as those relating to directors duties, and implements a number of EU Directives. Companies are also subject to the Insolvency Act 1986, non-statutory guidance such as the UK Corporate Governance Code, and case law of the UK courts. 30. General partnerships are formed under the Partnership Act 1890, which governs the rights and duties of the partners. The Limited Partnerships Act 1907 governs the formation and regulations of limited partnerships. The Limited Liability Partnerships Act 2000 allows partnerships formed under it to have a separate legal personality and they are governed by both partnership and company law.
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INTRODUCTION 17
professional service firms a surplus of GBP 6 billion (EUR 7.08) offsetting a large deficit in goods of GBP 82 billion (EUR 96.8 billion). Taxes paid by the financial services sector in 2008/9 amounted to GBP 61 billion (EUR 72.01 billion). 32. The following facts, produced by the industry 10, show the significant role the UK in general and London in particular play in the international financial market: banking: UK banking sector deposits are the third largest in the world. There were 249 branches and subsidiaries of foreign banks in London in March 2009, more than in any other centre worldwide, managing over one half of the UK banking sector assets, totalling over GBP 7.6 trillion (EUR 8.97 trillion) at the end of 2009, mainly on behalf of foreign customers. Approximately one half of European investment banking activity is conducted in London; insurance: The UK insurance industry is the largest in Europe and third largest in the world with net premium income of GBP 215 billion (EUR 253.8 billion) in 2008. London is the worlds largest international insurance market, with gross premium income of GBP 24.5 billion (EUR 28.9 billion) in 2008. The UK is the global market leader in marine insurance with a 17% market share (2008); exchange/securities markets: The London foreign exchange market is the largest in the world, with average daily turnover of around USD 1.8 trillion in April 2010. This represented 37% of global turnover, more than New York and Tokyo combined. The London Stock Exchange has a higher number of foreign listed companies than any other exchange and is one of the leading centres for foreign equity trading. It is also one of the leading locations for raising capital with a fifth of global further issues in the first nine months of 2009. London is also a leading centre for trading international bonds; fund management: Nearly one third of the GBP 3.7 trillion (EUR 4.37 trillion) of assets managed in the UK are managed on behalf of overseas clients. London is the leading European centre for private equity and is an important centre in the sovereign wealth market as a clearing house and a location from where some of these funds are managed; and professional services: London is one of the two leading centres for international legal services. Based on revenue the top three law firms in the world are international law firms based in London.
10.
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18 INTRODUCTION
London and the UK are a major international market for accounting and related services generating net exports of GBP 983 million (EUR 1.16 billion) in 2008. Core services include audit, tax advice, corporate finance and business recovery services.
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INTRODUCTION 19
Office of Fair Trading (OFT): Regulates consumer credit institutions and estate agents and holds a separate register of these businesses regulated by the OFT for AML purposes; Gambling Commission: Casinos; Professional bodies: There are 22 professional bodies representing accountants, lawyers etc that supervise the relevant professions; and HM Revenue and Customs (HMRC): High value dealers, money service businesses, trust and company service providers, auditors, accountants and tax advisers not supervised by another body (including FSA).
The FSA takes enforcement actions against firms and individuals for 37. breaches of their AML obligations and supervisory action to address shortcomings in firms AML compliance. They also conduct thematic reviews and carry out inspections by specialist financial crime supervisors. 38. Charities play an important role in the UK society. The Charity Commission for England and Wales is a Non-Ministerial Government Department responsible for the support and supervision of charities. Similar commissions have been established in Northern Ireland and Scotland.
Recent developments
39. A new Mutual Assistance Directive was adopted by the European Council on 15 February 2011 and will come into force on 1 January 2013. 40. In June 2010, the UK announced plans to reform the financial regulatory framework to provide the Bank of England with control of macroprudential regulation and oversight of micro-prudential regulation. Under the new regime, the FSA will cease to exist and its powers will be divided between new regulatory bodies.
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A. Availability of Information
Overview
41. Effective exchange of information requires the availability of reliable information. In particular it requires information on the identity of owners and other stakeholders as well as information on the transactions carried out by entities and other organisational structures. Such information may be kept for tax, regulatory, commercial or other reasons. If such information is not kept or the information is not maintained for a reasonable period of time, a jurisdictions competent authority may not be able to obtain and provide it when requested. This section of the report describes and assesses the UKs legal and regulatory framework on availability of information. It also assesses the implementation and effectiveness of this framework. 42. A good legal and regulatory framework for the maintenance of ownership and identity information is in place in the UK. It relies primarily on requirements on the legal entities themselves to maintain ownership and accounting information. Further, financial institutions and certain professions are required to conduct customer due diligence (CDD). These requirements, along with registration requirements and obligations to submit certain information to government authorities, assure that overall relevant ownership and accounting information is available. Very few areas relevant to transparency and international exchange of information for tax purposes are devolved or regulated differently in the four countries within the UK. Differences have been analysed but none of them were considered significant in the context of this report.
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dissuasive enough to ensure compliance, even by legal persons. With the exception of one case where poor retention practice of a bank was mentioned, the UKs international partners have not identified any cases where a request for ownership information was not responded to because the information had not been maintained in accordance with the law.
51. Companies House statistics show that, as of 10 February 2011, more than 2.5 million registered entities were private limited companies, about 105 000 entities were private companies limited by guarantee, there were
12. Terms of Reference to Monitor and Review Progress Towards Transparency and Exchange of Information.
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authorised to represent the company. However, no ownership information has to be provided. Companies House is required by law to maintain information held in 56. the register indefinitely. Where a company has been dissolved or a registered overseas company has ceased to have any connection with the UK, records may be destroyed after two years from the date the company was dissolved (s. 1084 Companies Act). However, its present practice is to keep all electronic information indefinitely.
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65. Section 793 of the Companies Act gives UK public companies the power to require anyone believed to have an interest in its shares to confirm their interest and disclose the identity of any other persons interested in the shares in question. Public companies must keep a register containing information gathered as a result of issuing a section 793 notice for at least six years (s. 808 and s. 816). According to the UK authorities, in practice, larger companies frequently issue section 793 notices to gather information on all of their shareholders and others with an interest in the shares. 66. While tax returns for companies typically do not contain information on the ownership of the company, companies must keep such records as may be needed to deliver a complete and correct tax return (para. 21, Schedule 18 to Finance Act 1998) and may be required to produce these records during an enquiry (para. 27, Schedule 18 to Finance Act 1998). There are also various provisions under the Corporation Tax Act 2010 which requires a company to be able to prove continuity of at least 50% of the shareholders (s. 719). For example: where a change of more than 50% of the ownership of a trading company 15 has taken place and there has been a major change in the nature or conduct of trade, trading, losses made prior to the change of ownership cannot be carried forward to set off against profits made after the change in ownership (s. 673); where a change of more than 50% of the ownership of a trading company has taken place, if the new owners feed in activity that has initial losses, these losses cannot be offset against profits arising prior to the change in ownership (s. 674); where a change of more than 50% of the ownership of a company with an investment business has taken place and there is a significant increase in capital or change in the conduct of the business, or the activities of the business prior to the change in ownership were negligible, any unrelieved management expenses and charges arising prior to the change in ownership may not be carried forward to an accounting period after the change in ownership (ss.677 and 692); and where there is more than a 50% change in the ownership of a company carrying on a UK or overseas property company and major changes in the nature or conduct of business, losses incurred prior to the ownership change cannot be carried forward to offset against profits made after the change in ownership (ss.704 and 705).
15.
A trading company is generally a company whose business consists wholly or mainly in the carrying on of a trade or trades as opposed to holding companies.
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Service providers
70. HM Treasury is responsible for the UK Money Laundering Regulations 2007 (MLR) as amended. It provides for various steps to be taken by the financial services sector and other persons to detect and prevent money laundering. It imposes obligations on relevant persons who are credit and financial institutions, auditors, accountants, tax advisers and insolvency practitioners, independent legal professionals, trust or company service providers, estate agents, high value dealers and casinos. 71. The term financial institution covers inter alia a person whose regular occupation or business is the provision investment services or the performance of an investment activity by way of business (regulation 3(3)(b), MLR). The term trust or company service providers covers all persons or
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firms providing these services by way of business. 16 The term covers firms or sole practitioners who by way of business provide services to other persons such as forming legal persons; acting, or arranging for another person to act as officer of a company, as a partner of a partnership or in a similar position in relation to other legal persons; providing a registered office, business address, correspondence or administrative address or other related services for a company, partnership or any other legal person or arrangements; acting, or arranging for another person to act as a trustee of a trust or similar legal arrangement, or a nominee shareholder for a person other than a company whose securities are listed on a regulated market (s. 3(10)). 72. The MLR requires regulated businesses to carry out customer due diligence (CDD), i.e. to identify the customer and verify the identity of the customer on the basis of documentation, data or information obtained from reliable and independent sources. Further, CDD includes identification of the beneficial owner. Verification of the identity of beneficial owners may be done on a risk sensitive basis in such a way that the regulated business is satisfied that it has confirmed who the beneficial owner is, and this includes, in the case of a legal person, trust or similar legal arrangement, taking measures to understand the ownership and control structure of the person, trust or arrangement (s. 5(b)). In line with the Third EU Anti-Money Laundering Directive, the beneficial owner means an individual who ultimately owns or controls (whether through direct or indirect ownership or control, including through bearer share holdings) more than 25% of the shares or voting rights of the company or otherwise exercises control over the management of the company (s. 6). CDD must be undertaken when a business relationship is established, when an occasional transaction is carried out, or in certain other high-risk situations (s. 7). 73. Trust and company service providers supervised by HMRC are visited as part of a risk based assurance programme. Part of the inspection procedure is for officers to ascertain that appropriate verification has taken place of the beneficial owners. As a tax authority HMRC also receives information on a wide variety of topics which is processed through our national Risk and Intelligence Service. Any information indicating irregularities in the beneficial ownership of a company that was known to be a client of a supervised entity, or indeed any information that caused concern about the AML compliance of such an entity in any respect would be forwarded, on a risk basis, to the assurance teams for investigation.
16. A trust or company service providers is acting by way of business if it has set up the business with the intention to undertake relevant activity, advertises or publicises the provision of the relevant activity or receives referrals from other businesses, carries the activity out with a view to profit and the relevant activity is pursued with reasonable and recognisable continuity.
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Nominees
74. According to the Companies House, nominee shareholding is quite common for listed companies where custodian ownership is the norm. UK law does not contain any obligation to indicate the fact that shares are held in a nominee capacity though the details of the beneficial owner of the shares has to be provided if the nominee receives a Companies Act s. 793 notice (see section A.1.5, below). Carrying on a business as a nominee shareholder or nominee director 75. is a regulated activity (regulation 3(10)(d)(ii) and (b)(i), MLR). Any nominee acting by way of business will be subject to AML customer due diligence obligations requiring the nominee to verify the beneficial owner of the shares held (regulation 5 of MLR refers). Nominees not acting by way of business are not covered by UK AML 76. obligations and are thus not obliged to hold information on the persons for whom they act. As UK authorities advise that most nominees act by way of business, and indeed where shareholdings are substantial this is even more the case, the lack of obligations on non-professional nominees to identify beneficial owners is not considered to represent a material gap. None of the peers have reported problems requesting ownership information related to companies with nominees. Nevertheless, the impact of this on international exchange of information in practice should be monitored by the UK on an ongoing basis.
Conclusion
77. There are comprehensive provisions in company law, AML law and financial regulations requiring UK incorporated companies to keep and, to a wide extent, file ownership information with Companies House and the FSA. While carrying on business as a nominee shareholder or nominee director is regulated, nominees holding shares in a non-professional capacity are not required to maintain information on the person for whom they act. 78. Companies incorporated in another jurisdiction but centrally managed and controlled from within the UK are considered UK resident for tax purposes. In UK tax law certain tax positions are subject to a maximum shift of ownership. Therefore, such companies need to keep ownership information in order to be able to deliver a complete and correct tax return. It is also highly likely that such companies operate bank accounts in the UK and may use the services from AML regulated professions such as lawyers, external accountants and auditors. Customer due diligence conducted by financial institutions and other service providers would result in information being gathered on the owners with at least 25% interest in the company. HMRC reports that it has never experienced any difficulties in obtaining ownership
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information for foreign incorporated companies which were centrally managed and controlled from within the UK. Nevertheless, as there are no direct mechanisms that assure that ownership information is available for such companies, it is recommended that the UK continue to monitor the availability of ownership and identity information for these companies to ensure that all necessary information can be provided to foreign authorities in accordance with international agreements.
17.
A company must have articles of association prescribing regulations for the company (s. 18 Companies Act).
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81. No statistics are available on the number of bearer shares issued in the UK. According to the UK authorities, it is believed to be on a very small scale. Academic commentary on the subject in the UK also states that bearer securities have never been popular with English investors or companies and are rarely used. 18 The FATFs 2007 Mutual Evaluation Report on the UK states that private sector feedback confirmed that use of share-warrants to bearer was rare in the UK. Further, no instances of bearer shares were found during the course of this review. However, bearer shares company formation services are advertised. 19 Therefore, there may be circumstances where such shares exist and in those cases information concerning their owners may not be available. The UKs competent authority for international exchange of information in tax matters does not recall ever having received a request for information regarding bearer shares. 82. Further information provided by the UK revealed that there were a total of 14 companies owned entirely in the form of bearer shares. The UK also reported that the UK Department of Business, Innovation and Skills (BIS) had written to these companies and companies that offer to set up companies through bearer shares explaining that the misuse of bearer shares was a matter of international concern. Apart from this, the UK also stated that s. 442 of the Companies Act, 1985 provided a power to investigate company ownership and that bearer shares could also be immobilised by the provisions contained in s. 445 of the same Act. However, it was further stated that these powers were exercisable by the BIS where there was good reason to do so but that they remain, so far, untested. 83. The UK has stated it is continuing to evaluate which measures are necessary to ensure that robust mechanisms are in place to identify the owners of the bearer shares, in addition to the powers that have been highlighted in the UKs intermediary report.
Conclusion
84. Even though share warrants to bearer are reportedly rare, where such warrants exist information concerning their owners may not be available.
18. 19. Gowers Principles of Modern Company Law, 6th edition, as quoted in the 2007 FATF-report on the UK. See e.g. www.jordans.co.uk/corporatelegalservices/bearersharesorderform.pdf, www.coddan-uk-company-formation.co.uk/bearer-shares-companies.html.
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86. Scottish partnerships have legal personality separate from the partners (s. 4(2), Partnership Act). However, like other UK partnerships, they are transparent for tax purposes. 87. There are also European Economic Interest Groupings (EEIGs) (Council Regulation (EEC) No. 2137/85 of 25 July 1985 on the European Economic Interest Grouping), a form of association between companies and other legal bodies, firms or individuals from different EU countries who operate together across national frontiers. An EEIG has a separate legal personality but it is transparent for UK income and corporation tax purposes (s. 842, ITA 2007 and s. 990, CTA 2010). 88. Companies House statistics show that, as of February 2011, there were approximately 18 500 registered limited partnerships, 45 500 LLPs and
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20.
The Department for Business estimates that there are approximately 2.8 million sole traders in the UK.
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Conclusion
105. UK partnership, tax and AML legislation ensures that information is available that identifies the partners in any partnership that has income, deductions or credits for tax purposes or carries on business in the UK; or is a limited partnership formed under UK law.
21.
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107. There are no specific provisions governing the formation of trusts for non-residents or where the assets settled in the trust are located outside the UK. There are no prohibitions on residents acting as a trustee in relation to a trust formed under foreign law. 108. There is no registry or depository for lodging trust deeds. However, according to HMRC statistics for 2008-09, approximately 190 000 trusts and estates filed a tax return. Of these, 107 500 were trusts paying tax at the special trust rate, 73 500 were interest in possession trusts and 9 000 were other types of trusts. Approximately 20 000 trusts have a corporate trustee.
Income tax
110. For tax purposes, trustees are deemed to be a single person, with taxation dependent on their residency status and the nature of the trust (ss.474-476, Income Tax Act 2007). A professional trustee who is not resident in the UK will be treated as being resident if at any time he/she acts as trustee in the course of a business he/she carries on in the UK through a branch or agency or permanent establishment. The residency status of the trust is determined as follows: if all the trustees are UK resident, the trust is UK resident; if none of the trustees is resident, the trust is non UK resident; or if some trustees are UK resident, the trust is UK resident if the settlor when providing funds for the settlement was resident, ordinarily resident or domiciled in the UK.
Where a trust is considered UK resident, the UK asserts taxing rights 111. on worldwide income and gains. Where a trust is non-UK resident, trustees are charged to income tax on UK source income. Beneficiaries of UK trusts are entitled to a tax credit funded by the income tax paid by the trustees. For bare trusts, income tax and capital gains tax are charged on the beneficiary, as if the trust did not exist. 112. There are two income tax provisions which require information to be provided to HMRC when a trust comes into existence: UK-resident settlors are required to notify HMRC of any settlements where the trustees are not resident in the UK (Taxation of Chargeable
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113. Also, information has to be provided when assets are distributed, or on cessation if there are potential inheritance tax or capital gains tax consequences. 114. Where there is UK-taxable trust income or gains arising, the trustee has to submit an income tax return and account for any tax due. In addition, beneficiaries who are within the UK self-assessment regime have to include trust income in their self-assessment tax return. HMRC is normally notified through receipt of form 41G (Trust) Trust Details when the trustees expect to pay income tax or capital gains tax, although the use of this form is not mandatory. The form sets out the settlor, the trustees and the settled assets. 115. Irrespective of whether HMRC is notified in advance, trustees must complete the core pages of the Trust and Estate Tax Return form SA900 for every tax year as long as the trust exists and has income or gains to declare. Where the trust has no income or likelihood of income, or where all income is taxed at source (e.g. tax deducted from bank interest or dividends with a tax credit) and that tax is equal to the trustees liability HMRC practice is to require trustees to complete a full return only once every five years (s. 8A, TMA 1970) 22 116. The Trust and Estate Tax Return SA900 contains inter alia the following information:
22.
identity of the settlor where assets or funds have been put into the trust during the tax year; discretionary income payments to beneficiaries and names of beneficiaries; details of capital transactions between trustees and the settlors; details of capital payments and benefits provided to beneficiaries whilst being non-resident for UK tax purposes; and details of any changes to the trustees details.
If a return notice has been issued, a nil return still has to be submitted. HMRC may then under their care and management powers (s. 1, TMA) decide not to issue returns for future years. But as a matter of policy HMRC will issue a return every five years to check the position of the trust.
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117. Trust and Estate Tax Returns are retained by HMRC for six years and 41G (Trust) forms are kept indefinitely.
Inheritance tax
118. Irrespective of their residence, trustees must file IHT returns when assets exceeding GBP 325 000 (EUR 384 000), irrespective of their location, have been transferred by a UK-resident settlor to the trust and on every tenth anniversary thereafter. The settlor will be liable to tax where the trust is not regarded as resident in the UK, i.e. its general administration is not ordinarily carried on in the UK and a majority of the trustees are not resident in the UK (s. 201 and s. 216 IHT Act). The tax return principally details information relating to the settlor and trustees on whom the taxing provisions fall. Supplementary pages include details on when and to whom gifts or other transfers are made from a trust and if assets ceased to be held on discretionary trust. 119. A professional who acts to set up a non-resident trust for a UK settlor must inform HMRC within three months of the settlement (s. 218, IHT Act 1984). They are required to provide the name and address of the settlor and the names and addresses of the trustees.
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Conclusion
125. Information on the trust will be available in all cases where the settlor is a UK resident. In addition, information will be available in all cases where there is UK-taxable income or gain, either because there is a UK-source or the trust is considered UK resident because all trustees are UK resident. In cases where the settlor is not UK resident and some of the trustees are not UK resident and there is no UK source income, information about the trust may not be available in the UK. However, in these cases there is a requirement for UK trustees to hold necessary information under: (i) trust law if the trust is governed by UK trust law; or (ii) UK AML law if the trustee(s) acts by way of business. The UK reports that it is rare for the UK to receive a request for information concerning the ownership of a trust and none of its peers have reported any difficulties in obtaining information on UK trusts. 126. It is conceivable that a trust could be created which has no connection with the UK other than that the settlor chooses the trust to be governed by UK law. In that event, there may be no information about the trust available in the UK and there would be no UK tax liability. In these situations trust
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information would have to be available in the jurisdiction where the trustee is located as the relevant records would be situated there.
Mutual societies
129. Building societies, credit unions and friendly societies exist to provide financial services to their members. A building society is a mutual financial services institution, primarily funded by its members, mainly to lend funds for housing. A credit union is a co-operative financial institution owned and controlled by its members and operated for the purpose of providing credit at reasonable rates and other financial services to its members. A friendly societys main purpose is to assist members financially during sickness, unemployment or retirement, and to provide life assurance. However, other purposes are possible such as the lawful promotion of sports and games. Further, there are Industrial and Provident Societies in the form of co-operative societies or community benefit societies which are run for the benefit of their members or the community respectively. All mutual societies have to register with the FSA. 23 Also, as separate 130. legal entities they have to submit corporate tax returns with the HMRC on the same basis as companies. Financial mutuals are regulated under the MLR, although certain mutual financial undertakings (i.e. those with small investment businesses) are exempt (regulation 4(1), MLR). Thus, they are required to undertake CDD on their members. Members have to be registered. 24
23.
24.
Section 1 Building Societies Act 1986; ss.7 and 8 Friendly Societies Act 1974 or s. 6 Friendly Societies Act 1992; s. 1 Credit Unions Act 1979 referring to IPS Act 196; s. 2 IPS Act 1965. IPSs and Credit Unions in Northern Ireland register with the Department of Enterprise, Trade and Investment (DETI). Schedule 2 para. 13 Building Societies Act 1986; Schedule 3 para. 14 Friendly Societies Act 1992; s. 1 Credit Unions Act 1979, s. 44 Industrial and Provident Societies Act 1965.
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Unauthorised unit trusts and their trustees are subject to the same rules previously presented in section A.1.4 of this report for trusts. 137. All types of CIS are subject to AML law (regulation 3(3)(d), MLR). When marketing or offering its units or shares, a CIS is required to undertake CDD on investors and beneficial owners holding at least a 25% interest in the CIS. The director, manager or trustee must exercise CDD and take all reasonable steps to ensure that information on unitholders is at all times complete and up to date (Schedule 3 to the OEIC Regulations and FSA Handbook Collective Investment Schemes 6.6.4). 138. If a CIS is set up as a company and issues bearer shares, ownership information may not be available for owners who have not exercised their owner rights in a way that requires the manager to perform CDD. However, according to FSA officials the assessment team spoke with, no cases seem to be known where bearer certificates have been issued.
Charities 26
139. Charities are organisations set up for specified charitable purposes or public benefit. They do not have owners and cannot distribute their profits. They are regulated by a charity regulator (in England and Wales: Charity Commission). Charities can take a variety of legal forms, the most common being charitable trust, unincorporated association, or company limited by guarantee. In addition to charity law, charities must comply with law specific to their legal form such as company law and trust law. On dissolution any remaining assets must be applied in accordance with the governing document. Where this is not possible, it is likely that they will be applied for similar charitable purposes. The charitys trustees are the people jointly responsible for administering a charity. If they have an annual income over GBP 5 000 (EUR 5 900), charities usually have to register and prepare annual accounts. If they have an annual income over GBP 25 000 (EUR 29 500) they are required to file these accounts with the Commission. Upon registration they must provide details of their trustees, copy of their trust deed and evidence of income level. Documents provided may or may not include the name of the settlor of a charitable trust. 140. Statistics show that there are currently 180 658 charities registered with the Charity Commission. Annual returns are filed by registered charities on time (82.7% of the time) or within a year after the end of the financial
26. Charities are governed under acts and law specific for England & Wales, Northern Ireland and Scotland. However, there are no significant differences relevant to this review and unless otherwise stated, where there are differences, the description in this report is based on the situation in the England and Wales.
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Companies Act
142. Where a company fails to submit reports to Companies House, the directors commit an offence and are liable on summary conviction to a fine not exceeding GBP 5 000 (EUR 5 900) and for continued contravention, to a daily fine of up to GBP 500 (EUR 590) (ss.451-453, Companies Act). In addition, where a company fails to file an annual return, the company, its directors and its officers can be liable to civil penalties not exceeding GBP 5 000 (EUR 5 900) and for continued contravention, to a daily penalty of up to GBP 500 (EUR 590) (s. 858, Companies Act). For the accounting period 2009-10 Companies House fined 230 000 private limited companies with GBP 110 million (EUR 130 million) and 1 075 public limited companies with GBP 2.5 million (EUR 2.95 million) for late filing of accounts. 143. Companies House makes sure that registered entities provide the necessary information. It examines information to ensure appropriate standards are met before acceptance and then places the information on the public record, although it does not have investigative powers or duty to check the accuracy of the information. However, BIS has powers to investigate companies under s. 447 of the Companies Act 1985, to compel the production of information, to enter business premises and to search for and seize documents where the companys management refuses to co-operate or there is a risk that documents may be destroyed. 144. Where a UK company fails to maintain a register of its members, this constitutes an offence for both the company and officers of the company. The penalty for such an offence on summary conviction is GBP 1 000 (EUR 1 190) and for continued contravention, there will be a daily default fine not exceeding GBP 100 (EUR 118) (s. 113(7) and (8), Companies Act).
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145. A person who fails to comply with a section 793 notice or makes a false statement either knowingly or recklessly is liable on conviction on indictment to imprisonment for a term not exceeding two years or a fine or both and on summary conviction to imprisonment or a fine not exceeding the statutory maximum (Part 22 Companies Act). The statutory maximum is defined as follows: in England and Wales the prescribed sum for the statutory maximum is GBP 5 000 (EUR 5 900) (s. 32(9) of the Magistrates Courts Act 1980); in Scotland the prescribed sum is GBP 10 000 (EUR 11 800) (s. 225(8) of the Criminal Procedure (Scotland) Act 1995); and in Northern Ireland the prescribed sum is GBP 5 000 (EUR 5 900) (s. 4(8) of Fines and Penalties (Northern Ireland) Order 1984).
Partnership law
147. If a limited partnership does not provide necessary information to Companies House, each of the general partners is liable to a fine of GBP 1 (EUR 1.2) for each day the default continues (s. 9, Limited Partnerships Act). Companies House statistics show that for the accounting period 1 April 2008 31 March 2009, Companies House fined approximately 4 500 limited partnerships with more than GBP 2.5 million (EUR 2.95 million) for late filing of accounts. An LLP which fails to maintain a register of members (part 5, Limited 148. Liability Partnerships (Application of Companies Act) Regulations 2009) is liable on summary conviction to a fine not exceeding GBP 5 000 (EUR 5 900) and to a daily default fine of GBP 500 (EUR 590). The LLP and its designated members are liable to a fine not exceeding 149. GBP 5 000 (EUR 5 900), for failing to deliver an annual return when required, in addition to a daily default fine not exceeding GBP 500 (EUR 590) for continued contravention. 150. A person guilty of an offence in relation to s. 1200 and s. 1201 of the Companies Act (using partners names when communicating with
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Tax law
151. Failure to give notice of chargeability for income or capital gains tax is subject to a tax-related penalty which varies according to the underlying behaviour up to 100% of the tax due. There are penalties for late filing: an initial penalty of GBP 100 (EUR 118), between 3 and 5 months there is a daily penalty of GBP 10 (EUR 18), and a penalty of GBP 300 (EUR 354) or 5% of the tax due after 6 and 12 months (Schedule 55 to Finance Act 2009). The penalty will also apply to each partner in a partnership where a partnership return is filed late. There is also a penalty for tax returns which are deliberately or carelessly incorrect; up to 100% of the tax owing (Schedule 55 to Finance Act 2009 and Schedule 24 to Finance Act 2007). The penalty for failing to give notice of chargeability for corporation 152. tax is up to 100% of the tax due (Schedule 41 to Finance Act 2008). Failure to file a company tax return is punishable by a fixed-rate penalty of GBP 100 (EUR 118) or GBP 200 (EUR 236), and potentially a tax-related penalty of 10% or 20%. Penalties increase to GBP 500 (EUR 590) and GBP 1 000 (EUR 1 180) for non-filing in the third or later successive year of default (paras. 17 and 18 Schedule 18 to Finance Act 1998). The penalty for an inaccurate return is dependent upon the behaviour (careless, deliberate, and deliberate and concealed) and up to 100% of the tax due. 153. The penalties for failing to notify HMRC of any income or capital gain that may be taxable; providing an inaccurate self-assessment return; or failing to file a return on time can reach up to 200% of the tax owed where assets and income are hidden abroad. The penalty rate is linked to the level of exchange of information the UK has with the jurisdiction in which the income or assets are held. 154. If an EEIG fails to deliver a return or accounts required by a HMRC notice, the EEIG will be liable to a penalty not exceeding GBP 300 (EUR 354) and to a daily fine of GBP 60 (EUR 71) for each day the failure continues. Where an EEIG fraudulently or negligently delivers an incorrect return, accounts or statement, the EEIG is liable to a penalty not exceeding GBP 3 000 (EUR 3 542) multiplied by the number of members of the grouping at the time of the delivery (s. 98B, TMA, as amended by paragraph 2, Schedule 11 to Finance Act 1990) 155. A professional who acts to set up a non-resident trust for a UK settlor and fails to inform HMRC of the settlement may be liable to a fine of
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GBP 300 (EUR 354) and a further penalty of GBP 60 (EUR 71) per day until the notification is made (s. 245A, Inheritance Tax Act 1984).
Conclusion
159. There is a range of sanctions available under each of the relevant laws to ensure that information required to be maintained or disclosed to administrative authorities is in fact maintained. The range of penalties allows for the authorities to apply a sanction proportionate to the nature and level of a breach of these laws. These penalties appear to be dissuasive enough to ensure compliance, even by legal persons. 160. In a small number of areas (most notably with respect to partnerships not filing documents with Companies House) the size of the applicable penalty appears low. However, the UK has strong regulatory authorities (including Companies House) with active inspection or monitoring programmes. This likely underpins the rather high compliance rate which authorities indicate all types of entities demonstrate. The compliance culture is complemented by the HMRCs broad powers to compel the production of information from natural and legal persons (see Section B of this report).
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give a true and fair view of the assets, liabilities, financial position and profit or loss (s. 393). Accounting records must in particular contain entries from day to day of all sums of money received and expended and the matters in respect of which the receipt and expenditure takes place; and a record of the assets and liabilities of the company. (s. 386). Accounts must be prepared in accordance with international accounting standards or in accordance with the requirements set out in s. 396 of the Companies Act for individual accounts or s. 404 for group accounts (s. 395). 163. A person who fails to maintain adequate records is guilty of an offence (ss.387 and 389, Companies Act). This person can be liable on indictment to imprisonment of up to two years or a fine or both or on summary conviction to imprisonment (twelve months England and Wales, six months Scotland and Northern Ireland) or a fine or both. 164. Limited companies are required, for each financial year, to file accounts with Companies House (Chapter 10 of Part 15 of Companies Act). The filing requirements vary depending on the size of company. Companies subject to the small companies regime must deliver a copy of a balance sheet. 27 They must also file a copy of the auditors report on the accounts (and any directors report) that it delivers. Statistics for the accounting period 2009-10, show that Companies House fined 230 000 private limited companies with GBP 110 million (EUR 130 million) and 1 075 public limited companies with GBP 2.5 million (EUR 2.95 million) for late filing of accounts. 28 165. An unlimited company needs only deliver accounts to Companies House if, at any time during the period covered by the accounts, it was a banking or insurance company (or the parent company of a banking or insurance company) or if its owners or their owners were all limited companies. 166. Entities subject to corporation tax 29 need to submit their statutory accounts to HMRC as part of their Company Tax Return (CT600). Moreover,
27. Under s. 382 Companies Act, a company qualifies as small if for a year in which it satisfies at least two of the following requirements: turnover not more than GBP 6.5 million (EUR 7.7 million), balance sheet total not more than GBP 3.26 million (EUR 3.85 million) or number of employees not more than 50. www.companieshouse.gov.uk/about/pdf/companiesRegActivities2009_2010.pdf. This includes inter alia limited companies incorporated in the UK; foreign-based companies with a permanent place of business in the UK; members clubs, such as social clubs, sports clubs and holiday clubs; societies, such as friendly societies and provident societies; associations, such as housing associations and trade associations; co-operatives; other unincorporated associations; groups of individuals carrying on a business that is not a partnership; charities, or companies that are subsidiaries of or wholly owned by a charity.
28. 29.
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Partnerships
167. Neither the Partnership Act nor the Limited Partnerships Act has specific requirements for general or limited partnerships regarding accounting records. However, partners are bound to render true accounts and full information of all things affecting the partnership to any partner or his legal representatives (s. 28, Partnership Act). The partnership books must be kept at the place of business of the partnership and be open to inspection by all the partners (s. 24(9) Partnership Act). This duty for partners to account to one another is defined by reference to case law, which states that regular accounts shall be kept of all receipts, payments, transactions and so on [] and [partners have the right] to have constant access for the purpose of inspecting the accounts (Rowe v Wood, 37 Eng. Rep 740 1557-1865. (1822) 2 Jac & W 553). Hanlon v Brookes and Ors [1996] also finds that partners owe each other fiduciary duty and this duty requires that all information which the fiduciary knows with regards to the property or transaction must be disclosed to the partners. There is therefore a clear obligation on partners to maintain accounting records in order to fulfil their fiduciary duty. 168. General and limited partnerships are not required to file accounts with Companies House. However, according to s. 5 of the Partnerships (Accounts) Regulations 2008, partners of a qualifying partnership (i.e. partnerships in which each partner is a limited company or otherwise has limited liability) have to prepare accounts for the partnership as if the partnership were a company and submit them to Companies House. Every person who is a members or director of a qualifying partnership is liable on summary conviction to a fine not exceeding GBP 5 000 (EUR 5 900) if audited accounts are not produced within 9 months of the end of the tax year. 169. Limited liability partnerships have to maintain and file accounts with Companies House in accordance with Company Law (Part 3 of the Limited Liability Partnership (Accounts and Audit) (Application of Companies Act) Regulations). Companies House statistics show that for the accounting year 2008-09, Companies House fined approximately 4 500 limited liability
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partnerships with a total of over GBP 2.5 million (EUR 2.95 million) for late filing of accounts. 30 170. Partnerships as well as foreign entities which are regarded as a partnership for the purposes of UK tax, have to file a partnership tax return where there are UK partners or UK source income. All partnerships and EEIGs are required to maintain accounting records for tax purposes under s. 12A and s. 12B of the TMA. They must maintain such records as may be required to deliver a correct and complete tax return. Partnerships must keep records of all receipts and expenses in the course of the trade, profession or business and records of the matters in respect of which those receipts and expenditure take place, and records of all sales and purchases made in the course of any trade involving dealing in goods. A partnership must also preserve all supporting documents. The penalty for failing to comply with these requirements is a fine of GBP 3 000 (EUR 3 540) (s. 12B TMA). Partnerships and EEIGs may also be required to maintain accounting records for VAT purposes. 171. One instance was reported by a peer where accounting information was not available regarding a Scottish limited partnership registered with Companies House. As a UK partnership it was subject to the above accounting obligations, however, since the entity had no UK tax-resident partners and no UK-taxable business, no accounting records were available within the UK jurisdiction. UK partnership law implies that in order to be registered in the UK, a limited partnership needs to have its principal place of business in the UK (s. 8, Limited Partnerships Act 1907). Subsequent to registration, the circumstances may change and the partnerships principle place of business may move outside of the UK. Cases such as the one reported are considered to be rare. However, the UK should monitor whether there is any effect of this on EOI in practice and seek to demonstrate that the issue is not material. The UK should continue monitoring this issue.
Trusts
172. Under common law, trustees are under a fiduciary duty to keep accounts of the trusts and to allow the beneficiaries to inspect them as requested (Pearse v. Green (1819) 1 Jac & W 135). Further, trustees should obtain good receipt from beneficiaries when they distribute trust property (Evans v. Hickson (1861) 30 Beav 136 and Re Hulkes (1886) 33 Ch D 552). 173. UK resident trusts or trusts with UK source income are required to maintain accounting records in relation to UK tax matters. They are required
30. www.companieshouse.gov.uk/about/pdf/companiesRegActivities2009_2010.pdf, accessed 2 April 2011.
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Charities
176. All charities in England and Wales are required to maintain accounting records and prepare annual statements of account (Part VI Charities, Act 1993). The trustees must ensure that accounting records are sufficient
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to show and explain all the charitys transactions and will disclose at any time with reasonable accuracy the financial position of the charity at that time. Charities in the form of a company have to comply with company law accounting rules (s. 41(5), Charities Act 1993). Any person who, without reasonable excuse, is persistently in default in relation to preparing an annual report or making it available may be guilty of an offence and liable on summary conviction to a fine not exceeding GBP 2 500 (EUR 2 950) (s. 49, Charities Act 1993).
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PEER REVIEW REPORT COMBINED PHASE 1 AND PHASE 2 REPORT UNITED KINGDOM OECD 2013
184. There is a six year limitation period for breach of trust (s. 21(3), Limitation Act 1980). Thus, trustees generally retain all relevant trusts documents for a period of six years. The retention period for accounting information of a trust provided for by tax law varies depending on the type of income. Trusts with non-business income and capital gains have to preserve records for at least 21 months following the end of the tax year (s. 12B(2)(b) TMA). Trusts with business income have to keep accounts for at least five years (s. 12B(2)(a)). 185. Trustees of a charity have to preserve accounting records for at least six years from the end of the financial year of the charity in which they are made (s. 41, Charities Act 1993). As company law overrules charity law when they are in conflict, charities that are companies must keep their accounting records for a period of three years (s. 388, Companies Act). Where a charitable trust ceases to exist within the six year period, the last remaining trustee must maintain those records unless the Charity Commission agrees to the records being disposed of. (s. 41(3-4), Charities Act 1993). The Charity Commission holds accounts and annual returns for seven years. 186. Collective investment schemes are subject to retention requirements for trusts and companies. In addition the FSA Handbook Collective Investment Schemes 6.6.6 states that all relevant records must be kept for six years. 187. Companies House is required to maintain information held in the register indefinitely. In the case of original documents, originals must be retained for three years after which they may be destroyed so long as the information contained therein has been entered in the register (s. 1083, Companies Act). Where a company has been dissolved, records held by Companies House may be destroyed any time after two years from when the company was dissolved (s. 1084, Companies Act). 188. For Corporate Tax returns and partnership tax returns, the current practice is for HMRC to retain company tax returns for a minimum of 20 and 6 years respectively.
Conclusion
189. UK company, partnership and trust law together with tax law, provide in most cases the necessary requirements to maintain accounting records that should correctly explain all transactions, enable the financial position of the entity or arrangement to be determined with reasonable accuracy at any time and allow financial statements to be prepared. Where record keeping requirements may be insufficiently prescribed in entity-specific legislation, sufficient requirements can be found in UK tax law. A retention period below
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194. Several record-keeping requirements for banks are set out in the FSA Handbook: a financial institution has to establish and maintain systems and controls to ensure that the firm maintains adequate records and arranges for orderly records to be kept of its business, including all services and transactions undertaken by it (Senior Management Arrangements, Systems and Controls (SYSC) 3 and 9.1); the Threshold Conditions (Schedule 6 to FSMA) state that for a firm to be authorised it must have adequate control systems. For a bank to meet this condition, it would have to have adequate records of its business and adequate systems of control of its business and records; a bank is required to capture and record on a timely basis and in an orderly fashion every transaction the bank enters into and show various details such as the parties involved (s. 3.2.2, Interim Prudential Sourcebook for Banks); a firm must keep at the disposal of the FSA, for at least five years, relevant data relating to all transactions in financial instruments which it has carried out, whether on its own account or on behalf of a client. Where a transaction was carried out on behalf of clients, the records shall contain all the information and details of the client and the information required under the Money Laundering Regulations 2007 (s. 17.4.3, Supervision Guidance); and a bank must provide customers with regular statements of account (s. 4.2, Banking Code of Business Sourcebook BCOBS). In order to do so, banks would have to maintain all financial and transactional information pertaining to the accounts.
195. In addition, banks are also required to maintain adequate records in order to fulfil tax requirements under ss.17 and 18, TMA and the EU Savings Directive to report automatically the name, address and date of birth or tax identification number of account holders, including certain non-resident account holders, and details of interest and equivalent amounts of interest paid to these account holders.
Conclusion
196. There are sufficient legal obligations in place for financial institutions to keep transaction and CDD information available. Though, in connection with a specific request, one peer mentioned poor record retention by a bank. However, this seems to have be an isolated incident.
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PEER REVIEW REPORT COMBINED PHASE 1 AND PHASE 2 REPORT UNITED KINGDOM OECD 2013
B. Access to Information
Overview
197. A variety of information may be needed in a tax enquiry and jurisdictions should have the authority to obtain all such information. This includes information held by banks and other financial institutions as well as information concerning the ownership of companies or the identity of interest holders in other persons or entities, such as partnerships and trusts, as well as accounting information in respect of all such entities. This section of the report examines whether the UKs legal and regulatory framework gives the authorities access powers that cover all relevant people and information, and whether rights and safeguards are compatible with effective exchange of information. It also assesses the effectiveness of this framework in practice. 198. In the majority of international exchange of information (EOI) cases where the UK provides information, this information is either already in the hands of HMRC (including Companies House information, accessible on-line) or it is provided on a voluntary basis. In all other cases, HMRC has to issue a formal notice to the information holder which is either approved by the person the information relates to or approved by a Tribunal. Noncompliance or destruction of requested information can be sanctioned with significant penalties. In cases where access to third party information requires Tribunal approval, the UK Competent Authority has to go through a very time-consuming procedure and this has been pointed out by several peers as a considerable concern. 199. Schedule 36 of Finance Act 2008 provides for comprehensive access to ownership, identity, accounting and banking information in specific cases. The 2011 assessment noted that the element B.1 (access to information) was not in place as the UK could not use its statutory information gathering powers for international exchange of information purposes where the name of the taxpayer was not known. This resulted in a limitation to access third party information which was not considered to be to the international standard. Only for domestic tax purposes and even there only for cases where a serious tax loss is suspected, could third parties be required
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31.
These powers cannot currently be used for EOI cases as they are limited to checking the UK tax position of concerned persons. The Finance Act 2011 includes a provision to extend these powers to EOI cases, thus removing the restriction on providing information where the name of the taxpayer cannot be established in EOI cases where there is a serious prejudice to the assessment and collection of tax. Although the amendment comes into force in April 2012, importantly, the powers apply in relation to tax regardless when it became due, whether before, on or after that date.
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Ownership, identity and banking information (ToR B.1.1) and accounting records (ToR B.1.2)
203. HMRCs access powers for direct tax purposes including for EOI purposes are gathered in Finance Act 2008, Schedule 36. In addition, the TMA and regulations in connection with the EU Savings Directive provide powers for bulk access to certain banking information.
Schedule 36
204. Following the merger of the former Inland Revenue and HM Customs and Excise in 2005, HMRCs powers to access information in specific cases, including for foreign taxes covered by an EOI agreement, have been gathered in Schedule 36 of Finance Act 2008. Schedule 36, in force since 1 April 2009, regulates HMRCs powers to access information either through issuance of a formal information notice or inspection of a business premises. Subject to certain conditions, Schedule 36 provides the right to make enquiries, to inspect, copy and remove documents that are produced, but not to search for or seize documents. It provides the power to access any document in a persons possession or power, or supply any other information. This might include, for example in the case of a bank, copies of bank statements, records of authorised signatories, etc. and any other relevant documentation which might help determine the sources and amounts of income and who had control of it. It also includes documents older than the retention period if this information is still available (see para. 20, Schedule 36 referring to documents older than six years).
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PEER REVIEW REPORT COMBINED PHASE 1 AND PHASE 2 REPORT UNITED KINGDOM OECD 2013
209. Schedule 36 of the Finance Act, 2008 has been amended by the Finance Act, 2012 by insertion of a new paragraph 5A in the Schedule. Under this new paragraph, the HMRC now has a statutory power to require a data holder to provide a persons name, address and date of birth, based on the identifying information that is provided by the HMRC to the data holder. With the insertion of the new paragraph 5A to Schedule 36, Tax position will cover situations where the information is required to answer EOI requests. Under the laws of the UK (Part 9 of schedule 36), tax includes foreign taxes. Paragraph 63(4) of Schedule 36 stipulates that a relevant foreign tax is one covered by international agreements entered into by the UK. 210. This new paragraph 5A states that an authorised officer of the Revenue and Customs may by notice in writing require a person to provide relevant information about another person (the taxpayer). The phrase relevant information has been defined to mean, the name, the last known address and the date of birth (in case of an individual). Paragraph 5A also specifies that these powers can be exercised when certain prescribed conditions are met. The conditions are (i) that the information is reasonably required by the officer for checking the tax position of the taxpayer, (ii) the taxpayers identity is not known to the officer but the officer holds information from which the taxpayers identity can be ascertained, (iii) the officer has reason to believe that the person will be able to ascertain the taxpayers identity from the information held by the officer and the person obtained the relevant information about the taxpayer in the course of carrying out the business and (iv) the taxpayers identity cannot readily be ascertained by other means from the information held by the officer. 211. On the phrase, information is reasonably required that is used in paragraph 5A, the UK has clarified that a request that was foreseeably relevant would certainly also be reasonably required under the meaning attached to the phrase in paragraph 5A of Schedule 36. The UK has further stated that the requesting party should also be able to show that it has pursued all means available in its territory to obtain the information, subject of course to the particular circumstances of its investigation. On the term, reasonably required, the UK has stated that as per a recent court decision, the test is whether information is required for the purpose of testing the tax position and is not whether as a matter of fact it turns out to affect the tax position. As for the condition, that the third part should have obtained the relevant information about the taxpayer in the course of carrying on business, the UK has clarified that this power is restricted to third party data holders who have this information as a consequence of some sort of business activity, for example, running a bank. Other third parties such as family members are not intended to be caught by the notice.
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continues. All penalties may be appealed to a tribunal. The 2011 report had also stated that compliance with the Schedule 36 notices is high.
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notification by the Tribunal of the date and time of the hearing 1 month; hearing of the application by the Tribunal and (if consent given) issue of the formal notice, giving the bank or third party at least 40 days to provide the information 40 days; and receipt of the information and exchange with the requesting country 1 week.
221. Since 2007, 70 information notices have been issued on behalf of treaty partners. In the period under review no draft notice has been declined by the Tribunal. The UK has also reported that since 2007 there were only two or three instances where the identity was unclear. 222. The UK provides its EOI partners with a checklist regarding information required to obtain a formal Schedule 36 notice. A previous version gave the impression that the name of the bank, sort code or branch address, and account number had to be provided. However, this is not a requirement in UK law. It is sufficient that there is enough information to allow identification of the particular customer relationship. The UK informed that this checklist has been amended and now states that the aforementioned information and the name of the accountholder are required if available. 223. Since the 2011 assessment, the UK has reported that its EOI team has improved its monitoring of all cases requiring Schedule 36 procedures, recording timelines for key stages and is striving to achieve continuous improvement. A new information exchange database delivered in March 2012 will assist case workers and managers to monitoring the progress of these cases. 224. The steps undertaken by the UK to improve the timeliness of information gathering are welcome and are likely to produce expected results. Nevertheless, these changes are recent and while comments from UKs EOI partners have been sought, it has not been possible to assess whether in practice the situation has improved. Apart from this, the new procedure introduced with paragraph 5A of Schedule 36 is recent and its practice will have to be monitored.
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33.
One example would be the combination of (i) A person who is or has been registered as a managing agent at Lloyds in relation to a syndicate of underwriting members of Lloyds, (ii) Information and documents relating to, and to the activities of, the syndicate and (iii) Income tax, capital gains tax Corporation tax. Another example would be (i) A plan manager (see section 696, ITTOIA 2005 (managers of individual investment plans), (ii) Information and documents relating to the plan, including investments which are or have been held under the plan and (iii) Income tax.
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Use of information gathering measures absent domestic tax interest (ToR B.1.3)
228. The 2011 assessment had identified an issue of obtaining information for persons that are not named absent a domestic tax interest. However, these have since been resolved (see section B.1).
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Professional privilege
235. The common law concept of legal professional privilege, 34 which attaches to certain confidential communications between a barrister or solicitor and his/her client applies to UK tax law. A person cannot be required to provide information or produce documents to which a claim to privilege could be maintained in legal proceedings (para. 23, Schedule 36). There are essentially two types of privilege: legal advice privilege and litigation privilege. Legal advice privilege concerns lawyers giving legal advice to their clients (and requests for advice); and litigation privilege applies to all documents created primarily for the purpose of ongoing or anticipated litigation. 236. There are also relevant statutory rules which create a particular form of privilege. Such statutory creations avoid disputes as to the nature of privilege in tribunal litigation, which is typically less formal. For example, the concept of legal professional privilege is extended to certain confidential communications between a client and a number of other admitted legal representatives such as a representative in a case before a First-Tier Tribunal to whom effective rights of audience and representation are given (Rule 11 of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009). This effectively provides something similar to litigation privilege for confidential communications between the appellant and the representative concerning the conduct of their tax appeal. The representative need have no qualifications whatsoever, legal or otherwise. Further, the UKs tax legislation protects the appeal papers from disclosure (e.g. para. 19(1)(a), Schedule 36 to Finance Act 2008). The class of documents covered will be the same as under litigation privilege.
34. In Scotland there is a similar concept, confidentiality of communications as between client and professional legal adviser (in Scotland a professional legal adviser is an advocate or solicitor).
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237. Whilst accountants and tax advisers can enjoy a statutory privilege in tribunal litigation, as explained above, ordinary legal advice privilege does not apply to communications between them and their clients. 35 However, Paragraphs 24 to 26 of Schedule 36 (Finance Act 2008) create a particular form of privilege for auditors and tax advisers regarding information they hold or documents they have produced in their capacity as auditors or tax advisors for the taxpayer or another person acting as auditor or tax adviser of the taxpayer. This latter statutory privilege does not cover working papers or documents executed in the course of a transaction itself. In other words, this provision will protect all information/documents produced when acting as an auditor or tax adviser but cannot protect the professional from disclosing evidence of the fact of a transaction (including contracts, deeds or other instruments). The privilege also does not protect evidence belonging to the tax adviser which explains any information or documents that the adviser has assisted in preparing for, or delivering to, HMRC (para. 26(1), Schedule 36).
Conclusion
238. Professional privileges in the UK encompass not only communication between an attorney or another person who is acting as a legal representative and their client related to legal proceedings or legal advice, but also documents produced by an auditor or a tax adviser for his clients concerning advice about the clients tax affairs. This latter privilege is beyond the exemption for attorney-client privilege under the international standards. However, the privilege does not cover working papers or documents executed in the course of a transaction itself and cannot protect the professional from disclosing evidence of the fact of a transaction (including contracts, deeds or other instruments). Also it should be noted that in practice, these exceptions have never been invoked to prevent HMRC from obtaining information for the purposes of an exchange of information request. Nor have any peers indicated they have experienced difficulty getting requested information due to professional privilege. Nevertheless, the UK should monitor the effect of this privilege for auditors and tax advisers to ensure it does not interfere with international exchange of information in tax matters.
35.
However, there is currently a challenge going through the UK Courts that the common law privilege ought to extend to confidential communications with accountants in the same way that it does for confidential communications with barristers, solicitors and advocates. The Supreme Court will hear the appeal later in 2011 or 2012.
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240.
However, on request from HMRC, the Tribunal may dis-apply the requirement to name the taxpayer in the notice if it is satisfied that HMRC has reasonable grounds for believing that this might seriously prejudice the assessment or collection of tax; or the requirement to notify the taxpayer if it is satisfied that HMRC has reasonable grounds for believing that notification might prejudice the assessment or collection of tax.
Based on the above legislation, HMRC routinely names the taxpayer 241. in a third party request and sends a notification to the (foreign) taxpayer. Exceptions are made if the applicant jurisdiction has reasonable grounds to believe that a taxpayer notification would regarding naming the taxpayer jeopardise, or regarding notification of the taxpayer seriously jeopardise the foreign tax investigation. In these cases HMRC will ask the Tribunal for an exception. The existence of such exceptions ensures that the notification procedure is consistent with the principle that rights and safeguards should not unduly prevent or delay effective exchange of information. There is no appeal or other process that a taxpayer can use to prevent 242. EOI. When the First-tier Tribunal (Tax) is considering whether it should issue a Tribunal-approved notice, the third party can make representations to the Tribunal, but there is no appeal against a Tribunal-approved notice once it has been issued. Appeals can only be made against sanctions for non-compliance with a notice. If however a notice is taxpayer-approved (which according to the UK authorities is rare in the EOI context) then the third party can appeal to the Tribunal on the grounds that it would be unduly onerous to comply with the notice or any requirement in it (para. 30, Schedule 36). 243. With respect to the new procedures that have been introduced through paragraph 5A of Schedule 36, that have been discussed in section B.1, the UK has clarified that a notice under para 5A of Schedule 36 can be issued without the prior approval of the tribunal. An appeal could only be made against this on the basis that it would be unduly onerous for the third party to comply. It is stated by the UK that a notice may be unduly onerous if the burden in terms of time and costs, placed upon the third party, are disproportionately greater than the benefit expected to be gained from the information in question. It is unlikely that providing the name, address and date of birth would be considered unduly onerous. Appeal would therefore be highly unlikely.
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PEER REVIEW REPORT COMBINED PHASE 1 AND PHASE 2 REPORT UNITED KINGDOM OECD 2013
C. Exchanging Information
Overview
244. Jurisdictions generally cannot exchange information for tax purposes unless they have a legal basis or mechanisms for doing so. A jurisdictions practical capacity to effectively exchange information relies both on having adequate mechanisms in place as well as an adequate institutional framework. This section of the report assesses the UKs network of EOI agreements against the standards and the adequacy of its institutional framework to achieve effective exchange of information in practice. 245. The UK has a very extensive network of bilateral agreements that provide for exchange of information in tax matters, currently covering 136 jurisdictions through 122 double tax conventions (DTCs) and 22 tax information exchange agreements (TIEAs). 36 Seven of the TIEAs are not yet in force as they are awaiting finalisation of the necessary procedure by either or both parties. All DTCs, with the exception of the 2010 treaty with Bahrain and the 2011 treaty with Ethiopia, are in force. The large majority of these agreements meet the international standards. Nevertheless, the UK should continue its programme of updating the last of its older agreements. The UK is also able to exchange information under some multilateral mechanisms.
36. Following the dissolution of the Netherlands Antilles on 10 October 2010, two separate jurisdictions were formed (Curacao and Saint Maarten) with the remaining three islands (Bonaire, St. Eustatius and Saba) joining the Netherlands as special municipalities. The TIEA concluded with the Kingdom of the Netherlands, on behalf of the Netherlands Antilles, continue to apply to Curacao, Sint Maarten and the Caribbean part of the Netherlands (Bonaire, St. Eustatius and Saba) and are administered by Curacao and Saint Maarten for their respective territories and by the Netherlands for Bonaire, St. Eustatius and Saba. The count of 22 TIEAs signed by the UK includes Curacao and St. Maarten but not the Caribbean part of the Netherlands which is a part of the country of the Netherlands.
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exchange of intelligence reports that it is making changes to its internal processes to ensure that it has a process to provide regular status updates. The UK has reported that it has developed a new database to ensure that status updates are provided in 90 days. However, these changes are recent and it has not been possible from comments received from UKs partners to determine whether these improvements have produced expected results. Accordingly, the Phase 2 recommendation in relation to the element C.5 is retained.
Summary
251. There is a variety of different instruments bilateral and multilateral agreements as well as EU Directives and Regulations through which the UK can assist other tax authorities and seek assistance from them in relation to both direct and indirect tax liabilities. These include: double taxation agreements (DTCs); tax information exchange agreements (TIEAs); the joint Council of Europe/OECD Multilateral Convention on Mutual Administrative Assistance in Tax Matters; 37 the new EU Council Directive 2011/16/EU of 15 February 2011 on administrative co-operation in the field of taxation, replacing Council Directive 77/799/EEC concerning mutual assistance by the competent authorities of the Member States of the EU in the field of direct taxation and taxation of insurance premiums; Regulation (EC) No 904/2010 concerning administrative co-operation by the EU Member States in the field of value added tax; Regulation (EC) No 2073/2004 concerning administrative co-operation by the EU Member States in the field of excise duties; and Directive 2010/24/EU on mutual assistance by the EU Member States for the recovery of claims relating to certain levies, duties, taxes and other measures.
252. When more than one legal instrument may serve as the basis for exchange of information for example where there is a bilateral agreement with an EU member which also applies Council Directive 77/799/EEC the
37. The UK has signed but not yet ratified the amending protocol to the Convention.
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overseas tax risks to the EOI team. These reports are dealt with in a similar way to requests; they are reviewed on receipt, allocated to a caseworker and entered on the EOI database. In the three years up to 31 March 2010, there were a total of 7 370 spontaneous exchanges sent to some 50 treaty partners. 257. The UK exchanges information with EU Member States and with some dependent territories of the Member States and third countries under EU Directive 2003/48 (the Savings Directive) and associated agreements. The UK also automatically exchanges information on a reciprocal basis under DTCs and under Council Directive 77/799/EEC with around 40 countries including EU Member States and non-EU countries. The total numbers of records exchanged per year exceeds 1 million.
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41.
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and three other jurisdictions are covered by the COE/OECD Convention. 42 These three types of arrangements allow for exchange of information with respect to all persons. Therefore, the wording in these 26 DTCs is clearly not of concern in practice. Further, the DTCs with the remaining 52 jurisdictions which limit the application of the treaty to residents of the contracting parties also note that information is to be exchanged for carrying out the provisions of domestic laws. As the domestic laws are applicable to non-residents as well as to residents, under these 52 agreements information can be exchanged in respect of all persons. 264. The DTCs with four out of the 52 above mentioned jurisdictions specifically exclude certain residents of those jurisdictions from the scope of the arrangement to ensure that they do not benefit from the provisions concerning the avoidance of double taxation. According to the UK this restriction also applies to EOI. However, two of these jurisdictions, Malta and Antigua and Barbuda, are covered by the EU Council Directive 77/799/EEC and a TIEA respectively. The UK should take necessary steps to make sure that its EOI arrangements with the remaining two jurisdictions, Barbados and Jamaica, allow for exchange of information for all persons, including companies established under the International Business Companies Act for Barbados and companies established under enactments relating to International Business Companies and International Finance Companies for Jamaica. Though it has to be noted that presently no such entities seem to exist in Jamaica. 43 265. The UK competent authority has advised that it has never had any difficulties with any of its EOI-agreement partners with respect to this scope issue. The UK has provided and received information unrestricted by the residence or nationality of the person to whom the information relates.
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48.
Antigua and Barbuda, Belize, British Virgin Islands, Grenada, Guernsey, Isle of Man, Jersey and Saint Kitts and Nevis. Barbados, Egypt, Fiji, Gambia, Israel, Jamaica, Kenya, Namibia, Nigeria, Papua New Guinea, Sri Lanka, Swaziland, Tunisia, Zambia and Zimbabwe. Argentina, Australia, Azerbaijan, Bangladesh, Belarus, Bolivia, Bosnia and Herzegovina, Brunei Darussalam, Bulgaria, Canada, Chile, China, Chinese Taipei, Cte DIvoire, Croatia, Cyprus, Czech Republic, Denmark, Estonia, Falkland Islands (Malvinas), Georgia, Ghana, Guyana, Hungary, Iceland, India, Indonesia, Ireland, Italy, Jordan, Kazakhstan, Kirabati, Korea (South), Kuwait, Latvia, Lesotho, Lithuania, Malawi, Malta, Mongolia, Montenegro, Morocco, Myanmar, Norway, Pakistan, Philippines, Portugal, Romania, Russian Federation, Serbia, Sierra Leone, Slovak Republic, Solomon Islands, Spain, Sudan, Sweden, Tajikistan, Thailand, Trinidad and Tobago, Turkey, Turkmenistan, Tuvalu, Uganda, Ukraine, United States, Uzbekistan, Venezuela and Vietnam. Australia, Canada, Denmark, Estonia, Ghana, Hungary, India, Ireland, Italy, Norway, Philippines and the United States.
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even before Article 26 of the Model Tax Convention was amended in 2005 to include paragraphs 4 and 5. However, exchange will be subject to reciprocity and there may be domestic limitations in place in the laws of some of these partners. This may inter alia be the case with jurisdictions where the EOI provision limits exchange of information to information available under their respective taxation laws. 49 268. Based on the above, among the 136 jurisdictions with which the UK has an EOI agreement, 16 (second and thid bullet point above) of these jurisdictions are not covered by agreements that allow the UK to exchange all types of information. Further, there may be limitations in place in the EOI framework of some of the 68 treaty partners referred to in the fifth bullet point above that prevents EOI to the standard. In these cases, the absence of a specific provision requiring exchange of bank information unlimited by bank secrecy may serve as a limitation on the exchange of information which can occur under the relevant DTC. The UK should continue its programme of renegotiating its older treaties with relevant partners not yet to standard in order to incorporate wording in line with Article 26(5) of the OECD Model Tax Convention. The UK should also examine ways to bringing the deficient post-2005 arrangement up to the international standard as soon as practicable.
49. 50.
51.
Brunei, Kiribati, Tuvalu, Montserrat, Sierra Leone and Solomon Island. Austria; Bahrain; Belgium; Botswana; Canada; Cayman Islands; Chile; Ethiopia; Faroe Islands; France; FYROM; Germany; Hong Kong, China; Japan; Libya; Luxembourg; Malaysia; Mauritius; Mexico; Moldova; Montserrat; Netherlands; New Zealand; Poland; Qatar; Saudi Arabia; Singapore; Slovenia; South Africa; Switzerland; United States. Denmark, Finland, Georgia, Iceland, Ireland, Italy, Korea (South), Norway, Portugal, Spain, Sweden and Ukraine.
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Exchange of information in both civil and criminal tax matters (ToR C.1.6)
274. Information exchange may be requested both for tax administration purposes and for tax prosecution purposes. The international standard is not limited to information exchange in criminal tax matters but extends to information requested for tax administration purposes (also referred to as civil tax matters). The UK provides assistance at the administrative level when
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the requested information relates to a criminal tax matter in the requesting jurisdiction. The UK will, on request, give as much priority to such cases as possible. 275. All of the UKs EOI agreements provide for exchange of information in both civil and criminal tax matters. However, UKs TIEA with Liechtenstein signed 11 August 2009 includes an accompanying Memorandum of Understanding which sets out the terms of a five year taxpayer assistance and compliance programme by Liechtenstein and a five year special disclosure facility by the United Kingdom. Article 6(e) of the TIEA states that a requested State may decline a request if: the request is made on or before 31 March 2015 and does not relate to a criminal tax matter in respect of which the requesting State has formally commenced a criminal investigation, and the person identified in a request according to Article 5(6)(a) has not applied to disclose under a tax disclosure facility of the requesting party where he is eligible to do so, accordingly, for avoidance of doubt, the competent authority of the requested party may not decline a request by the requesting party for information relating to a person who has applied to disclose under a tax disclosure facility of the requesting party. 276. Therefore, in respect of requests made prior to 31 March 2015 in a civil tax matter or in a criminal tax matter where investigations have not commenced, the request may be declined unless the taxpayer has applied to disclose their tax position under the tax disclosure facility. Accordingly, at present, this agreement is not to the standard. That said, the UK authorities are of the view that the TIEA, the taxpayer assistance and compliance programme and the disclosure facility, must be considered together. Their combined effect is strong co-operation between Liechtenstein and the UK.
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number of agreements signed over these past two years. While this timeframe is not currently of concern, it is recommended that the UK continues to bring agreements into force expeditiously. 283. Information on the UKs programme of tax treaty negotiations is confidential until such time as the Ministers announce the programme for a particular financial year. The next announcement is expected to be made by Ministers in 2011. Progress achieved on individual negotiations is not usually made public. The UK has reported that it is continuing to keep its older treaties under review with a view to renegotiating them to ensure that they reach the international standard but did not report any concrete results so far.
Conclusion
286. By virtue of amendments made to its legal framework, as reported in relation to element B.1, the UK now ensures that information is accessible in accordance with the standard.
Determination and factors underlying recommendations
Phase 1 determination The element is in place. Factors underlying recommendations Recommendations It is recommended that the UK continues its program of renegotiating the last of its older treaties which are not yet to the standard. Phase 2 rating Compliant
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287. The UKs network of 144 signed bilateral agreements and two multilateral agreements encompasses a wide range of counterparties, including all of the EU member States and all of the 33 OECD member economies. It also covers: all of its 10 primary trading partners (USA, Germany, the Netherlands, China, France, Ireland, Belgium, Italy, Spain, Switzerland) 17 of the 18 other G20 jurisdiction (except Brazil) 79 Global Forum member jurisdictions; and 22 jurisdictions in Africa, 30 in Asia, 15 in the Caribbean, 2 in Central America, 47 in Europe, 2 in North America, 6 in Oceania and 10 in South America.
288. The UK has never declined to establish an EOI agreement with a jurisdiction seeking the same. The UKs network of agreements includes DTCs as well as TIEAs. It is the UK policy to negotiate a TIEA instead of a DTC when there is no need for a treaty on taxation rights. 289. It can be seen that the UK has an extensive network of agreements allowing for exchange of information for tax purposes. In addition, the UK authorities have an ongoing programme of establishing agreements and revising agreements where necessary in order to bring them to standard. As the UK has EOI agreements to standard with its most important trading partners, commonly its new agreements arise from requests received from other jurisdictions seeking an agreement with the UK. 290. The UKs most significant EOI relationships measured inward and outward requests and the volumes of spontaneous and automatic exchanges over a number of years are: France, Spain, Ireland, USA, Australia, Germany, Italy, Netherlands, Sweden and Canada. This does to some extent reflect the economic relationships with these jurisdictions but there are also other factors such as thresholds applied in other jurisdictions or nature of economic relationship and nature of requests that influence the number of requests.
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C.3. Confidentiality
The jurisdictions mechanisms for exchange of information should have adequate provisions to ensure the confidentiality of information received.
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294. These provisions strictly control the disclosure of all information obtained or held by HMRC, and there is no specific provision therefore for foreign source information. Where however foreign source information is provided to the UK under the terms of an EOI agreement, the provisions on use and disclosure of that information contained in the agreement are typically more restrictive and HMRC applies these more restrictive provisions. HMRC staff, or persons acting on their behalf, breaching the disclosure provisions of the Commissioners for Revenue and Customs Act, may be subject to a penalty of up to two years imprisonment and an unlimited fine (s. 19 Commissioners for Revenue and Customs Act 2005). 295. Additionally, any disclosure must be in accordance with the Data Protection Act 1998 and Human Rights Act 1998. Broadly, these Acts overlay a further requirement that disclosures of HMRC information must be both necessary and proportionate. In respect of the new procedures under paragraph 5A of Schedule 36 296. that have been discussed in section B.1, the UK has clarified that its practice is to provide the third party with the minimum information necessary to respond to the request. Normally when the taxpayer is within its jurisdiction, the UK with approach him/her for any information. When it is unavailable or refused or a first party notice will not produce it, a third party is approached. Where the particular circumstances of the investigation require that a taxpayer does not learn of the request, the UK will not inform him/her, if the tribunal agrees. The UK has further stated that for the vast majority of third party requests where schedule 36 powers are not needed, they will not contact the taxpayer at all. 297. In practice, all communication with a partner authority is treated as confidential. This includes, for example, questions and clarifications made after receipt of the initial request. Information received pursuant to an EOI arrangement is held by the EOI team in locked cabinets. When a request is closed, the papers are scanned and the paper shredded. Scanned papers are
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held electronically in a secure Controlled Access Folder and most of them are deleted after six years in accordance with data protection policy. Where information received pursuant to an EOI arrangement is referred outside the EOI team, papers are stamped with a treaty stamp and forwarded with a covering memorandum giving advice on use and disclosure. All information is exchanged either by post, by encrypted e-mail or by CCN mail (the secure mail system used by members of the EU). There have been no cases in the UK where information received by the competent authority from an EOI partner has been made public other than in accordance with the terms under which it was provided to the UK.
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Statistics
304. The UK competent authority received approximately 1 200 requests a year over the last three years. According to the UKs 22 EOI partners that have provided detailed peer input, over 50% of cases, the UK is able to provide information within 90 days. Where information cannot be provided within 90 days, in some cases no status update is provided. The UKs own figures for the period 2007-09 show that HMRC provided final responses to information requests within 90 days in approximately 54% of cases. Approximately 22 % of requests are finally responded to between 90 and 180 days and 17% between six months and one year. In almost 8% of cases, responses take more than a year, see response time described under B.1 for cases that require a Tribunal-approved notice. It needs to be noted though that the data provided by the UK calculates the time elapsed between the date of receipt of a request to the date the case was closed on the EOI database. The date of closure is often later than the date that the information was provided to the requesting country; for example, where there is any doubt as to whether or not the requesting country will require further assistance, the requesting country will be asked to confirm that the information provided is sufficient before the request is closed on the EOI database. Therefore, the average response time will be faster than is shown by these statistics.
56. Bahamas, Gibraltar, Guernsey, Isle of Man, Jersey and Liechtenstein.
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of the 90 day standard and the new EU Directive on mutual assistance, the competent authority has recently changed its target for responses from 6 months in all cases to: two months where information is readily available in-house; six months if information needs to be gathered outside HMRC; and more than six months for complicated cases.
308. The 2011 assessment stated that the UK should make sure that in all cases updates are provided within 90 days. 309. The UK has recentely reported that it now has the necessary processes in place to provide status updates within 90 days. It has stated that a new database has been developed for the EOI team, delivered in March 2012 to ensure these status updates. It has been reported that this database has the facility to provide much improved reports for caseworkers and managers, allowing closer monitoring of timelines for all aspects of exchange of information. This includes providing reports of all requests received within a certain period and for which an interim report or status update has not been provided. 310. Since the 2011 assessment made during the combined review, the UK appears to have taken some measures to be able to provide status updates within 90 days. In particular, the development of a new database is a means to improve its administrative practices either by a closer monitoring of the different timelines or by being in a better position to provide update of status. Over the course of this review, inputs from peers were sought, but an in-depth examination of the UKs EOI practice has not been conducted. Neither is enough data available on this, nor has the assessment team received any peer input verifying the adequacy of the new arrangements. Given this scenario and the remaining uncertainties, the UK should monitor the new processes it has put in place to provide status updates within 90 days.
Organisational process and resources (ToR C.5.2) Competent authority for exchange of information
311. The competent authority 57 for the United Kingdom are the Commissioners for Her Majestys Revenue and Customs (HMRC) or their authorised representative. In practice, the Commissioners delegate their competent authority responsibilities to a (relatively) small number of named
57. The term competent authority means the person or government authority designated by a jurisdiction as being competent to exchange information pursuant to a double tax convention or tax information exchange.
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provided within five working days. A covering stencil is completed before the request is entered into the EOI database, and where the competent authority has any concerns about validity these are noted on the stencil. The allocated caseworker will seek any clarification necessary or explain to the requesting country why the UK cannot obtain and exchange the information. 315. In most cases where information is already in the hands of HMRC (including Companies House information accessible on-line), it will be available on the desktop of the CEI caseworker, e.g. tax return information is recorded electronically for individuals and companies. The CEI is also able to search other HMRC databases and some commercial databases for information. The EOI team applies a powerful access and search tool which runs across 23 different HMRC databases. These internal databases are checked before sources outside HMRC are accessed. The CEI is only rarely requested to obtain information from another government authority. Just over 50% of requests can be answered as described in this paragraph.
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Determination
Recommendations
Jurisdictions should ensure that ownership and identity information for all relevant entities and arrangements is available to their competent authorities. (ToR A.1) Phase 1 determination: The element is in place, but certain aspects of the legal implementation of this element require improvement. There may be a limited number of bearer shares in circulation at present but no instances of bearer shares were found in the course of the review. Nevertheless, the mechanisms in place to ensure the availability of information allowing for identification of their owners are insufficient. The United Kingdom should either take necessary measures to ensure that robust mechanisms are in place to identify the owners of bearer shares or eliminate such shares.
Phase 2 rating: Largely Compliant Jurisdictions should ensure that reliable accounting records are kept for all relevant entities and arrangements. (ToR A.2) Phase 1 determination: The element is in place. Phase 2 rating: Compliant Banking information should be available for all account-holders. (ToR A.3) Phase 1 determination: The element is in place. Phase 2 rating: Compliant
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Determination
Recommendations
Competent authorities should have the power to obtain and provide information that is the subject of a request under an exchange of information arrangement from any person within their territorial jurisdiction who is in possession or control of such information (irrespective of any legal obligation on such person to maintain the secrecy of the information). (ToR B.1) Phase 1 determination: The element is in place. Phase 2 rating: Largely Compliant The formal process to obtain information (other than information already in the possession of HMRC or information which is voluntarily provided to HMRC) is complex and on average takes 12 months to complete before information is provided to the requesting jurisdiction. This process unduly delays effective exchange of information. The UK should ensure, building on the recent changes made to internal processes and the procedures introduced through para 5A to Schedule 36, that its procedure for accessing information is compatible with effective international exchange of information in tax matters.
The rights and safeguards (e.g. notification, appeal rights) that apply to persons in the requested jurisdiction should be compatible with effective exchange of information. (ToR B.2) Phase 1 determination: The element is in place. Phase 2 rating: Compliant Exchange of information mechanisms should allow for effective exchange of information. (ToR C.1) Phase 1 determination: The element is in place. It is recommended that the UK continues its program of renegotiating the last of its older treaties which are not yet to the standard.
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Determination
Recommendations
The jurisdictions network of information exchange mechanisms should cover all relevant partners. (ToR C.2) Phase 1 determination: The element is in place. The UK should continue to develop its EOI network to the standard with all relevant partners.
Phase 2 rating: Compliant The jurisdictions mechanisms for exchange of information should have adequate provisions to ensure the confidentiality of information received. (ToR C.3) Phase 1 determination: The element is in place. Phase 2 rating: Compliant The exchange of information mechanisms should respect the rights and safeguards of taxpayers and third parties. (ToR C.4) Phase 1 determination: The element is in place. Phase 2 rating: Compliant The jurisdiction should provide information under its network of agreements in a timely manner. (ToR C.5) This element involves issues of practice that are assessed in the Phase 2 review. Accordingly no Phase 1 determination has been made. Phase 2 rating: Largely Compliant Data from peers shows that the UK does not routinely provide requesting parties with status updates when requested information is not provided within 90 days of receipt of the request. The UK should monitor the new processes that has put in place to ensure that is able to provide status updates within 90 days.
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ANNEXES 103
59.
This Annex presents the jurisdictions response to the review report and shall not be deemed to represent the Global Forums views.
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104 ANNEXES
60.
Note by Turkey: The information in this document with reference to Cyprus relates to the southern part of the Island. There is no single authority representing both Turkish and Greek Cypriot people on the Island. Turkey recognises the Turkish Republic of Northern Cyprus (TRNC). Until a lasting and equitable solution is found within the context of the United Nations, Turkey shall preserve its position concerning the Cyprus issue. Note by all the European Union Member States of the OECD and the European Commission: The Republic of Cyprus is recognised by all members of the United Nations with the exception of Turkey. The information in this document relates to the area under the effective control of the Government of the Republic of Cyprus.
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ANNEXES 105
entities being resident of another EU member state are effectively taxed in accordance with the fiscal laws of their state of residence. It also aims to ensure exchange of information between member states; and OECD Convention on Mutual Administrative Assistance in Tax Matters and Amending Protocol. The UK has ratified the Convention and signed the Protocol. The other parties are Azerbaijan, Belgium, Canada, Denmark, Finland, France, Georgia, Germany, Iceland, Ireland, Italy, Korea, Mexico, Moldova, Netherlands, Norway, Poland, Portugal, Slovenia, Spain, Sweden, Ukraine, United Kingdom and United States of which only Azerbaijan, Canada and Germany have not yet signed the Protocol which will come into force 1 June 2011.
Bilateral agreements
Jurisdiction 1 2 3 4 5 Anguilla Antigua and Barbuda Argentina Aruba Australia Type of EoI arrangement TIEA DTC Protocol TIEA DTC TIEA DTC DTC 6 Austria Protocol Protocol Protocol 7 8 9 10 11 12 Azerbaijan Bahamas Bahrain Bangladesh Barbados Belarus DTC TIEA DTC DTC DTC Protocol DTC DTC Date signed 20-07-09 19-12-47 05-03-68 18-01-10 03-01-96 05-11-10 21-08-03 30-04-69 17-11-77 18-05-93 11-09-09 23-02-94 29-10-09 10-03-10 08-08-79 26-03-70 18-09-73 31-07-85 07-03-95 08-07-90 26-11-70 12-12-73 30-01-86 17-12-03 N/K N/K N/K 19-11-10 03-10-95 07-01-11 Date in force 17-02-11 19-12-47 19-09-68 19-05-11 01-08-97
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106 ANNEXES
Type of EoI arrangement DTC Protocol DTC 14 Belize Protocol Protocol TIEA 15 16 17 18 19 Bermuda Bolivia Bosnia and Herzegovina Botswana British Virgin Islands TIEA DTC DTC DTC DTC TIEA DTC 20 21 22 23 24 25 26 27 28 29 30 31 Brunei Darussalam Bulgaria Canada Cayman Islands Chile China Cte DIvoire Croatia Chinese Taipei Curacao
61
Jurisdiction 13 Belgium
Date signed 01-08-87 24-06-09 19-12-47 08-04-68 12-12-73 25-03-10 04-12-07 03-11-94 06-11-81 09-09-05 29-10-09 29-10-09 08-12-50 04-03-68 12-12-73 16-09-87 08-09-78 07-05-03 15-06-09 12-07-03 26-07-84 26-06-85 06-11-81 08-04-02 10-09-10 20-06-74 02-04-80 05-11-90
Date in force 04-10-89 19-12-47 08-03-69 12-12-73 10-11-08 23-10-95 18-09-82 04-09-06 12-04-10 12-04-10 08-12-50 N/K N/K 28-12-87 18-12-80 04-05-04 20-12-10 21-12-04 23-12-84 24-01-87 16-09-82 23-12-02 18-03-75 15-12-80 20-12-91
Protocol Protocol DTC DTC Protocol DTC DTC DTC DTC DTC DTC TIEA DTC Protocol DTC
61. 62.
The count of 22 TIEAs includes Curacao and St. Maarten but not the Caribbean part of the Netherlands which is a part of the Netherlands jurisdiction, see footnote 36. See footnote 60.
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ANNEXES 107
Jurisdiction 32 33 34 35 36 37 38 39 Denmark Dominica Egypt Ethiopia Estonia Falkland Islands (Malvinas) Faroe Islands Fiji
Type of EoI arrangement DTC Protocol Protocol TIEA DTC DTC DTC DTC DTC DTC DTC Protocol Protocol Protocol Protocol Protocol
Date signed 11-11-80 01-07-91 15-10-98 31-03-10 25-04-77 10-06-11 12-05-94 17-12-97 20-06-07 21-11-75 17-07-69 17-05-73 16-11-79 01-10-85 26-09-91 31-07-96 19-08-08 08-11-06 20-05-80 13-07-04 04-02-10 30-03-10 20-01-93 24-08-09 25-06-53 04-03-49 25-07-88 31-03-10 24-06-52 14-12-94 20-01-09 20-01-09
Date in force 17-12-80 N/K N/K 23-08-80 N/K 18-12-97 03-06-08 27-08-78 05-02-70 07-07-74 25-04-81 N/K N/K N/K 18-12-09 02-08-07 05-07-82 11-10-05 17-12-10 30-12-10 10-08-94 15-12-10 15-01-54 04-03-49 14-12-88 24-06-52 03-01-95 27-11-09 27-11-09
40
Finland
41 42 43 44 45 46 47 48 49
DTC DTC DTC DTC Protocol DTC DTC TIEA DTC DTC Protocol TIEA DTC Protocol Protocol TIEA
50
Guernsey
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108 ANNEXES
Type of EoI arrangement DTC DTC DTC DTC DTC DTC DTC 57 Ireland Protocol Protocol DTC Protocol 58 Isle of Man Protocol Protocol TIEA 59 60 61 62 Israel Italy Jamaica Japan DTC Protocol DTC DTC DTC DTC 63 Jersey Protocol Protocol TIEA 64 65 66 Jordan Kazakhstan Kenya DTC DTC Protocol DTC Protocol/EoN Protocol 67 68 69 Kiribati Korea (South) Kuwait Protocol DTC DTC DTC
Date signed 31-08-92 21-06-10 28-11-77 30-09-91 25-01-93 05-04-93 02-06-76 07-11-94 04-11-98 29-07-55 19-12-91 14-12-94 29-09-08 29-09-08 28-09-62 20-04-70 21-10-88 16-06-73 02-02-06 24-06-52 14-12-94 10-03-09 10-03-09 22-07-01 21-03-94 18-09-97 31-07-73 20-01-76 10-05-50 04-03-68 25-07-74 25-10-96 21-07-99
Date in force 18-12-92 20-12-10 27-12-78 19-12-91 25-10-93 14-04-94 23-12-76 21-09-95 23-12-98 29-07-55 19-12-91 N/K 02-04-09 02-04-09 N/K 25-03-71 31-12-90 31-12-73 12-10-06 24-06-52 N/K 27-11-09 27-11-09 24-03-02 15-12-96 02-11-98 N/K 30-09-77 10-05-50 23-10-68 25-07-74 30-12-96 01-07-00
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Type of EoI arrangement DTC DTC TIEA DTC TIEA DTC Protocol DTC Protocol Protocol Protocol DTC
Date signed 08-05-98 17-12-97 01-11-10 17-11-08 11-08-09 19-03-01 21-05-02 24-05-67 18-07-78 28-01-83 02-07-09 25-11-55 12-07-68 10-02-78 17-12-97 22-09-09 12-05-94 11-02-81 23-10-86 27-03-03 10-01-11 02-06-94 23-04-09 08-11-07 23-04-96 06-11-81 19-12-47 06-04-68 09-12-09 13-03-50 04-04-51 08-09-81
Date in force 30-12-98 23-12-97 08-03-10 02-12-10 28-11-02 28-11-02 12-07-68 N/K N/K 28-04-10 25-11-55 13-09-68 14-03-79 08-07-98 28-12-10 27-03-95 19-10-81 N/K 22-10-03 15-12-94 18-01-11 30-10-08 04-12-96 16-09-82 19-12-47 04-12-68 13-03-50 04-04-51 29-11-90
76
Luxembourg
77
Malawi
Protocol Protocol DTC Protocol DTC DTC Protocol Protocol Protocol DTC Protocol DTC DTC DTC DTC Protocol Protocol DTC Protocol DTC
78 79
Malaysia Malta
80
Mauritius
81 82 83 84 85
86 87
Myanmar Morocco
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110 ANNEXES
Type of EoI arrangement DTC Protocol DTC TIEA63 DTC 90 91 92 93 94 95 96 97 98 99 New Zealand Nigeria Norway Oman Pakistan Papua New Guinea Philippines Poland Portugal Qatar Protocol Protocol DTC DTC DTC Protocol DTC DTC DTC DTC DTC DTC Protocol DTC DTC DTC TIEA TIEA TIEA TIEA DTC and Protocol DTC TIEA
Date signed 28-05-62 14-06-67 26-09-08 10-09-10 04-08-83 04-11-03 07-11-07 09-06-87 12-10-00 23-02-98 26-11-09 24-11-86 17-09-91 10-06-76 20-07-06 27-03-68 25-06-09 20-10-10 18-09-75 15-02-94 19-12-47 18-01-10 18-01-10 18-01-10 16-02-10 31-10-07 06-11-61 10-09-10
Date in force 19-12-62 27-11-67 25-12-10 16-03-84 23-07-04 28-08-08 27-12-87 21-12-00 09-11-98 09-01-11 08-12-87 20-12-91 22-01-78 27-12-06 17-01-69 15-10-10 21-11-76 18-04-97 19-12-47 19-05-11 19-05-11 19-05-11 01-01-09 16-09-82
100 Romania 101 Russian Federation 102 Saint Kitts and Nevis 103 Saint Lucia Saint Vincent and the 104 Grenadines 105 San Marino 106 Saudi Arabia 107 Serbia 108 Sint Maarten64
63. 64.
See footnote 36 regarding Curacao, Sint Maarten and the Caribbean part of the Netherlands. See footnote 36 regarding Curacao, Sint Maarten and the Caribbean part of the Netherlands.
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Jurisdiction 109 Sierra Leone 110 Singapore 111 112 113 Slovak Republic Slovenia Solomon Islands
Type of EoI arrangement DTC Protocol DTC Protocol DTC DTC DTC Protocol Protocol DTC Protocol DTC DTC DTC DTC DTC DTC DTC Protocol
Date signed 19-12-47 18-03-68 12-02-97 24-08-09 05-11-90 13-11-07 10-05-50 08-04-68 25-07-74 04-07-02 08-11-10 21-10-75 15-03-95 21-06-79 08-03-75 26-11-68 30-08-83 08-12-77 05-03-81 17-12-93 26-06-07 07-09-09 31-07-85 18-02-81 31-12-82 15-12-82 19-02-86 31-07-85 22-07-09 10-05-50 04-03-68 25-07-74 23-12-92
Date in force 19-12-47 16-01-69 19-12-97 08-01-10 20-12-91 11-09-08 10-05-50 24-01-69 25-07-74 17-12-02 N/K N/K 21-05-80 08-10-77 18-03-69 26-03-84 N/K 10-05-82 19-12-94 22-12-08 15-12-10 18-04-97 20-11-81 22-12-83 20-01-84 26-10-88 30-01-86 25-01-11 10-05-50 23-10-68 25-07-74 21-12-93
114 115
120 Switzerland
121 Tajikistan 122 Thailand 123 Trinidad and Tobago 124 Tunisia 125 Turkey 126 Turkmenistan 127 Turks and Caicos Islands 128 Tuvalu 129 Uganda
DTC DTC DTC DTC DTC DTC TIEA DTC Protocol Protocol DTC
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112 ANNEXES
Type of EoI arrangement DTC DTC Protocol DTC DTC DTC DTC Protocol DTC
Jurisdiction 130 Ukraine 131 United States 132 Uzbekistan 133 Venezuela 134 Vietnam 135 Zambia 136 Zimbabwe
Date signed 10-02-93 24-07-01 19-07-02 15-10-93 11-03-96 09-04-94 22-03-72 30-04-81 19-10-82
Date in force 11-08-93 19-07-02 31-03-03 10-06-94 31-12-96 15-12-94 29-03-73 14-01-83 11-02-83
PEER REVIEW REPORT COMBINED PHASE 1 AND PHASE 2 REPORT UNITED KINGDOM OECD 2013
ANNEXES 113
Partnership law
Partnership Act 1890 Limited Partnerships Act 1907 Limited Liability Partnerships Act 2000 Limited Liability Partnerships (Northern Ireland) Act 2002 European Economic Interest Grouping Regulations 1989 Limited Liability Partnerships (Accounts and Audit) (Application of Companies Act) Regulations 2008 Limited Liability Partnerships (Application of Companies Act) Regulations 2009 Partnerships (Accounts) Regulations 2008 The Insolvent Partnerships Order 1994
Trust law
Convention on the Law Applicable to Trusts and on Their Recognition 1985 Recognition of Trusts Act 1987
PEER REVIEW REPORT COMBINED PHASE 1 AND PHASE 2 REPORT UNITED KINGDOM OECD 2013
114 ANNEXES
Trustee Act 1925 Trustee Act 2000 Evans v. Hickson (1861) 30 Beav 136 Knight v. Knight (1840) 3 beav 148 Pearse v. Green (1819) 1 Jac & W 135 Limitation Act 1980 Public Trustee Act 1906 Public Trustee Rules 1912.rtf Re Hulkes (1886) 33 Ch D 552
Charity law
Charities Act 1993 Charities Act 2006 Charities Act (Northern Ireland) 2008 Charities and Trustee Investment (Scotland) Act 2005 Charities (Accounts and Reports) Regulations 2008
Mutual law
Building Societies Act 1986 Building Societies (Accounts and Related Provisions) Regulations 1998 Credit Unions Act 1979 Credit Unions (Northern Ireland) Order 1985 Friendly and Industrial and Provident Societies Act 1968 Friendly Societies Act 1974 Friendly Societies Act 1992 Industrial and Provident Societies (Northern Ireland) Act 1969 Industrial and Provident Societies Act 1965
PEER REVIEW REPORT COMBINED PHASE 1 AND PHASE 2 REPORT UNITED KINGDOM OECD 2013
ANNEXES 115
Financial Services Markets Act 2000 FSAs Handbook of Rules and Guidance
Tax law
Finance Act 1990 Finance Act 1998 Finance Act 2006 Finance Act 2008 Schedule 36 Finance Act 2009 Finance Act 2010 Reporting of Savings Income Information Regulations 2003 Corporation Tax Act 2010 Corporation Tax (Notice of Coming Within Charge Information) Regulations 2004 Inheritance Tax Act 1984 Taxes Management Act 1970 Tribunals Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009 Commissioners for Revenue and Customs Act 2005 Value Added Tax Act 1994 Value Added Tax Regulations 1995 Arrangements between HMRC and the British Bankers Association for the issuing of third party information notices to banks under paragraph 2, Schedule 36, Finance Act 2008 Banking or Other Third Party Documentation/Information: Background Information Required to Obtain a Formal Notice Under Schedule 36 Finance Act 2008 (HMRC checklist for EOI partners)
European law
Council Directive 85-611-EEC Undertakings for Collective Investment in Transferable Securities Council Regulation (EEC) 2137-85 on the European Economic Interest Grouping (EEIG)
PEER REVIEW REPORT COMBINED PHASE 1 AND PHASE 2 REPORT UNITED KINGDOM OECD 2013
116 ANNEXES
Directive 2003-48-EC European Savings Directive Directive 2004-39-EC Markets in Financial Instruments Directive Directive 2004-109-EC Transparency Directive Directive 2005-60-EC Money Laundering Directive EU Directive 95-46-EC on Data Protection
Other legislation
Data Protection Act 1998 Government of Wales Act 1998 and 2006 Northern Ireland Act 1998 Scotland Act 1998
PEER REVIEW REPORT COMBINED PHASE 1 AND PHASE 2 REPORT UNITED KINGDOM OECD 2013
ANNEXES 117
HM Treasury
Deputy Director, International Tax Senior Policy Advisor, International Tax Legal Adviser Head of Anti-Money Laundering Policy, Counter Illicit Finance
PEER REVIEW REPORT COMBINED PHASE 1 AND PHASE 2 REPORT UNITED KINGDOM OECD 2013
118 ANNEXES
Manager, Authorisations and Central Reporting Division Senior Associate, Enforcement and Financial Crime Senior Associate, CIS Policy Advisor, AML
Companies House
Director of Corporate Strategy
Charity Commission
Senior Adviser Legal Adviser
PEER REVIEW REPORT COMBINED PHASE 1 AND PHASE 2 REPORT UNITED KINGDOM OECD 2013
OECD PUBLISHING, 2, rue Andr-Pascal, 75775 PARIS CEDEX 16 (23 2013 68 1 P) ISBN 978-92-64-20597-0 No. 61041 2013-01
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