Advisers are being left vulnerable to paying a tax of £3,000 if they do not comply with a little known new tax legislation imposed by HM Revenue & Customs.
A notice published in September this year states financial advisers, accountants and solicitors with UK resident clients who have an account with offshore money or assets in it, should send a letter HM Revenue & Customs has provided to those clients.
Advisers who do not send this letter by 31 August 2017 could be subject to a £3,000 tax penalty.
The letter, which demands UK residents bring their tax affairs up to date, states “the tax world is becoming more transparent” and closes with the phrase, “come to us before we come to you”.
George Bull, senior tax partner at accountancy and advisory firm RSM, told FTAdviser this leaves advisers with two choices, and a "damned if you do, damned if you don't" scenario.
He explained one of the options for advisers is to send the letters to all the clients from their firms, with the upside being that everyone would be notified, and the downside being that it would cause confusion and upset for clients to whom the letter is not relevant.
The second option is to send the letters only to clients within the scope of this advice, with the upside being that the process is targeted, and the downside being that if one letter is missed to a client the adviser firm faces at £3,000 fine.
Mr Bull said: "I can understand HM Revenue & Customs wanting to clean up dodge city, but giving a choice to responsible advisers which amounts to 'damned if you do, damned if you don't', won't make much difference in getting to isolated cases of abuse."
Damian Bloom, a partner at law firm Berwin Leighton Paisner, said the vast majority of clients who receive the notices would be compliant.
"There is a risk of compliant clients wondering what the notice is about."
He told FTAdviser the new legislation follows on from the Liechtenstein Disclosure Facility which ran from 2009 to 2015 and offered opportunities for errant tax payers to come forward to HM Revenue & Customs.
In August last year, tax experts Baker Tilly warned anyone with undisclosed overseas income, gains or assets would be wise to make use of the Liechtenstein Disclosure Facility while it lasts.
At that time, Andrew Hubbard, a partner at the firm, warned advisers that everything he has heard has led him to conclude that life for tax evaders will only get tougher following the phasing out of the facility.
A total of £1.5bn was taken under the Liechtenstein Disclosure Facility.
Mr Bloom said: "If you know your tax return is incorrect then you have to correct it. What's underlying is that the revenue think there is still a huge pool of untaxed offshore money.
"People offshore don't think of themselves as tax evaders. By asking them to make sure they are compliant they might come forwards.