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.
"There will be more to follow in terms of guidance [for example from HM Revenue & Customs]. It will develop over the next few months. It is early days at the moment."
Mr Bloom said it would be a "brave IFA who is caught by this" and said the £3,000 referred to the breach of the rules itself not per breach.
He added: "It is tied into the new rule of failing to prevent facilitation of tax evasion for banks and financial institutions.
"We must make sure the procedures are in place to prevent tax evasion. You are in breach if you fail to have sufficient procedures in place to prevent it. There's a bit of a pincer movement going on [from HMRC].
"It targets an awful lot of fully compliant individuals. It is all based on an assumption that there's a huge black hole but if there is not, all they are doing is adding compliance cost and drag to the industry."
Scott Gallacher, a director at Leicester-based Rowley Turton, said there is a lack of clarity on whether the new legislation applies to financial advisers or not in the way it has been presented in the notice.
"I would have thought HMRC and the FCA would have made it clear either way.
"We are assuming we do have to comply to it but I object to it because we are basically doing HM Revenue & Customs job for them.
"It is not a nice letter to send - I'm not sure as a business we want to send letters to clients that say 'come to us before we come to you'."
A spokesperson for HM Revenue & Customs said: "The new legislation was designed to make people aware that HMRC will soon be getting data about offshore accounts from over 100 jurisdictions; there’s a disclosure facility, and penalties and other sanctions are going to get worse so come forward now.
"It’s being sent by tax advisers and financial institutions because – at the moment - they know more about who is likely to get reported to HMRC. It’s right that these industries play their part in raising awareness on automatic exchange."
The spokesperson added a web page went live on 30 September when the laws came into force, with links to guidance that went up earlier that week.
