Are you or your firm Tax Advisers? - 10th January 2021 Deadline
YOU MAY BE UNPLEASANTLY SURPRISED!
Due to Covid-19 and the myriad of problems that it has created, it is possible that some firms have not yet fully appreciated the implications of the 5th Money Laundering Directive that came into effect on the 10th January 2020, brought into UK law by the Money Laundering and Terrorist Financing (Amendment) Regulations 2019 (MLR 2019).
Are you, or is your firm now a Tax Adviser?
One very important change introduced was to the definition of “tax advisers”. This change may potentially bring many firms and freelancers within the scope of the Money Laundering Regulations.
The definition of a tax adviser under MLR 2017 has been extended by MLR 2019 and is now:
“a firm or sole practitioner who by way of business provides material aid, or assistance or advice, in connection with the tax affairs of other persons, whether provided directly or through a third party, when providing such services.”
Examples of activities that may include tax adviser services are included in the SRA guidance. These include:
Will writing – if tax advice is given in relation to the client’s circumstances.
Probate – issues relating to IHT.
Litigation – this may arise if there are negotiations with HMRC.
Personal Injury – settlement awards may lead to tax consequences.
Employment – settlements, employee share schemes, pension schemes and other benefits.
Family Law – Involving divorce and ancillary matters where the ownership of assets is affected.
All firms, sole practitioners and freelancers should therefore carefully consider the areas of work that they engage in, and the advice that they provide to decide if they now fall within the definition of a “tax adviser”, and are therefore within the scope of the money laundering regulations.
It may be useful to consider what a “tax adviser” actually is and to break the definition down to assist with understanding the requirements.
In their guidance issued on 23rd November 2020 the SRA stated that the definition of ‘tax adviser’ is very broad, and any firm providing a service that addresses or might impact the tax affairs of a client should carefully consider whether their services fall within it.” The full guidance can be found at: https://www.sra.org.uk/solicitors/resources/money-laundering/money-laundering/tax-adviser-guidance/
Material Aid – the SRA guidance indicates that this will include activities such as making tax filings and making payments on behalf of clients or even providing a client with a link to HMRC information relating to their specific circumstances
Assistance – This will extend to non-advisory services like drafting tax-related documents e.g. tax covenants.
So with this broad definition and the guidance provided by the SRA many firms may now therefore require compliance with the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (MLR 2017) and of course the 2019 Regulations that have brought about the change.
What do Firms Need to Do?
Firms Already Registered with the SRA for AML Purposes…
- Check to see if any departments within the firm that were considered to be outside the scope of the MLR are now within scope due to the changes, e.g. the employment, family and wills & probate departments.
- Change your anti-money laundering authorisation and notifying the SRA that you or your firm is a tax adviser by submitting Form FA10b to the SRA before 10th January 2021 via your firm’s mySRA account.
- Update the Firm Wide Risk Assessment.
- Update your Policies, Controls and Procedures.
- Ensure relevant staff have the relevant training.
- Check the answers given in your last PII application in relation to the provision of tax advice and update your insurer if required.
- Review your client care letters and terms of business in relation to the provision of tax advice.
Firms Not Currently Registered with the SRA for AML Purposes…
If following a review of the services that you provide you decide that you fall within the definition of a “tax adviser” as you are providing material assistance or advice in relation to tax related matters you must:
- Register with the SRA by 10th January 2021 using form FA10 via your firm’s mySRA account. The registration involves having the firm’s Beneficial Owners, Officers and Managers (BOOMs) approved and each person will need a Disclosure and Barring Service (DBS) check.
- Appoint a Money Laundering Compliance Officer (MLCO) and a Money Laundering Reporting Officer (MLRO).
- Carry out a Firm Wide Risk Assessment of your firm.
- Establish appropriate Policies, Controls and Procedures to comply with the Money Laundering Regulations
- Ensure that all staff, including agents and consultants, receive appropriate training on the Money Laundering Regulations
- Check the answers given in your last PII application in relation to the scope of your firm’ provision of tax advice and update your insurer if required
- Review your client care letters and terms of business in relation to the provision of tax advice
- The firm’s COLP should also consider whether it would be appropriate to report any breaches of the MLR / SRA Standards and Regulations that have arisen as a result of non-compliance to the SRA.
If you require any assistance or support in relation to AML compliance, or any other compliance matters, please contact CPM21. AML related services include:
- Assistance with the preparation of Policies, Controls and Processes
- Assistance with Firm Wide Risk Assessments
- Training – currently available remotely
- Independent AML Audits as required by the MLR 2017