Firms that advise clients on setting up offshore companies and trusts may soon receive letters from HMRC requesting information on their beneficial owners.
The letters will precede formal notices that are likely to follow no less than two weeks later, the Law Society said.
The notices will seek the name and address of any client seeking to create an offshore entity; details of the entity’s name, jurisdiction, and date of registration; and information on persons with beneficial ownership or interest in the entity and the nature of that interest.
Legal professional privilege
HMRC told the Law Society that it is not seeking information covered by the privilege and has confirmed in correspondence with the law body that its powers under the Finance Act 2011 do not override LPP.
Despite this, the Law Society believes firms must satisfy for themselves whether complying with the notices are compatible with a client’s right to LPP.
HMRC’s position is that it is requesting information about transactions and not advice, therefore it does not believe that LPP will be triggered.
The Law Society disagrees, citing a 2004 House of Lords decision: “… all communications between a solicitor and his client relating to a transaction in which the solicitor has been instructed for the purpose of obtaining legal advice will be privileged, notwithstanding that they do not contain advice on matters of law or construction, provided that they are directly related to the performance by the solicitor of his professional duty as legal adviser of his client.”
The guidance the Law Society is giving to firms is that, because HMRC’s request is likely to be related to advice that clients have sought, LPP is very likely to be engaged.
Public interest
The Law Society said that it understands why HMRC regards the information as being in the public interest. “It is, however, also a matter of settled law that when a balance is to be struck between competing public interests, predominance is to be given to legal professional privilege.
“Neither the Law Society nor individual law firms will wish to be in conflict with HMRC. Nevertheless, the Law Society has informed HMRC that it will vigorously defend and protect legal professional privilege by all possible means, including litigation as necessary.”
