Global Forum on Transparency and Exchange of Information for Tax Purposes Peer Reviews: United Kingdom 2011 by OECD

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The Global Forum on Transparency and Exchange of Information for Tax Purposes is the multilateral framework within which work in the area of tax transparency and exchange of information is carried out by over 90 jurisdictions which participate in the work of the Global Forum on an equal footing.
The Global Forum is charged with in-depth monitoring and peer review of the implementation of the standards of transparency and exchange of information for tax purposes.  These standards are primarily reflected in the 2002 OECD Model Agreement on Exchange of Information on Tax Matters and its commentary, and in Article 26 of the OECD Model Tax Convention on Income and on Capital and its commentary as updated in 2004, which has been incorporated in the UN Model Tax Convention. 
The standards provide for international exchange on request of foreseeably relevant information for the administration or enforcement of the domestic tax laws of a requesting party. “Fishing expeditions” are not authorised, but all foreseeably relevant information must be provided, including bank information and information held by fiduciaries, regardless of the existence of a domestic tax interest or the application of a dual criminality standard.
All members of the Global Forum, as well as jurisdictions identified by the Global Forum as relevant to its work, are being reviewed. This process is undertaken in two phases. Phase 1 reviews assess the quality of a jurisdiction’s legal and regulatory framework for the exchange of information, while Phase 2 reviews look at the practical implementation of that framework.  Some Global Forum members are undergoing combined – Phase 1 plus Phase 2 – reviews. The ultimate goal is to help jurisdictions to effectively implement the international standards of transparency and exchange of information for tax purposes.
All review reports are published once approved by the Global Forum and they thus repr

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									GLOBAL FORUM ON TRANSPARENCY AND EXCHANGE
OF INFORMATION FOR TAX PURPOSES



Peer Review Report
Combined: Phase 1 + Phase 2


UNITED KINGDOM
      Global Forum
    on Transparency
      and Exchange
 of Information for Tax
Purposes Peer Reviews:
 United Kingdom 2011
             PHASE 1 + PHASE 2



                     August 2011
  (reflecting the legal and regulatory framework
                   as at June 2011)
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.


  Please cite this publication as:
  OECD (2011), Global Forum on Transparency and Exchange of Information for Tax Purposes Peer
  Reviews: United Kingdom 2011: Combined: Phase 1 + Phase 2: Legal and Regulatory Framework
  Global Forum on Transparency and Exchange of Information for Tax Purposes: Peer Reviews,
  OECD Publishing.
  http://dx.doi.org/10.1787/9789264118164-en



ISBN 978-92-64-11814-0 (print)
ISBN 978-92-64-11816-4 (PDF)



Series: Global Forum on Transparency and Exchange of Information for Tax Purposes: Peer Reviews
ISSN 2219-4681 (print)
ISSN 2219-469X (online)




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Revised version, September 2011.
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                                                                                                 TABLE OF CONTENTS – 3




                                            Table of Contents


Executive summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
   Information and methodology used for the peer review of the United Kingdom. . . 9
   Overview of the United Kingdom . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
   Recent developments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17

Compliance with the Standards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

A. Availability of information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
   Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   19
   A.1. Ownership and identity information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                      21
   A.2. Accounting records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .            45
   A.3. Banking information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .             53
B. Access to information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
   Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
   B.1. Competent Authority’s ability to obtain and provide information . . . . . . . . 58
   B.2. Notification requirements and rights and safeguards. . . . . . . . . . . . . . . . . . 68
C. Exchanging information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
   Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   71
   C.1. Exchange-of-information mechanisms . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                        73
   C.2. Exchange-of-information mechanisms with all relevant partners . . . . . . . .                                       84
   C.3. Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .       85
   C.4. Rights and safeguards of taxpayers and third parties. . . . . . . . . . . . . . . . . .                             87
   C.5. Timeliness of responses to requests for information . . . . . . . . . . . . . . . . . .                             88




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4 – TABLE OF CONTENTS

Summary of Determinations and Factors Underlying Recommendations . . . 95

Annex 1: Jurisdiction’s Response to the Review Report . . . . . . . . . . . . . . . . . .101
Annex 2: List of all Exchange-of-Information Mechanisms in Force. . . . . . . .103
Annex 3: List of all Laws, Regulations and Other Relevant Material . . . . . . .111
Annex 4: People Interviewed during On-Site Visit . . . . . . . . . . . . . . . . . . . . . .115




                    PEER REVIEW REPORT – COMBINED PHASE 1 AND PHASE 2 REPORT – UNITED KINGDOM © OECD 2011
                                                                            ABOUT THE GLOBAL FORUM – 5




                             About the Global Forum


          The Global Forum on Transparency and Exchange of Information for Tax
      Purposes is the multilateral framework within which work in the area of tax
      transparency and exchange of information is carried out by over 100 jurisdic-
      tions, which participate in the Global Forum on an equal footing.
          The Global Forum is charged with in-depth monitoring and peer review of
      the implementation of the international standards of transparency and exchange
      of information for tax purposes. These standards are primarily reflected in the
      2002 OECD Model Agreement on Exchange of Information on Tax Matters
      and its commentary, and in Article 26 of the OECD Model Tax Convention on
      Income and on Capital and its commentary as updated in 2004. The standards
      have also been incorporated into the UN Model Tax Convention.
          The standards provide for international exchange on request of foreseeably
      relevant information for the administration or enforcement of the domestic tax
      laws of a requesting party. Fishing expeditions are not authorised but all fore-
      seeably relevant information must be provided, including bank information
      and information held by fiduciaries, regardless of the existence of a domestic
      tax interest or the application of a dual criminality standard.
          All members of the Global Forum, as well as jurisdictions identified by
      the Global Forum as relevant to its work, are being reviewed. This process is
      undertaken in two phases. Phase 1 reviews assess the quality of a jurisdic-
      tion’s legal and regulatory framework for the exchange of information, while
      Phase 2 reviews look at the practical implementation of that framework. Some
      Global Forum members are undergoing combined – Phase 1 and Phase 2 –
      reviews. The Global Forum has also put in place a process for supplementary
      reports to follow-up on recommendations, as well as for the ongoing monitor-
      ing of jurisdictions following the conclusion of a review. The ultimate goal is
      to help jurisdictions to effectively implement the international standards of
      transparency and exchange of information for tax purposes.
           All review reports are published once adopted by the Global Forum.
          For more information on the work of the Global Forum on Transparency
      and Exchange of Information for Tax Purposes, and for copies of the published
      review reports, please refer to www.oecd.org/tax/transparency.


PEER REVIEW REPORT – COMBINED PHASE 1 AND PHASE 2 REPORT – UNITED KINGDOM © OECD 2011
                                                                                 EXECUTIVE SUMMARY – 7




                                  Executive summary

       1.       This report summarises the legal and regulatory framework for trans-
       parency 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 Forum’s 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 compe-
       tent authority’s 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 cen-
       tres in the world (City of London), the UK has a long history in negotiating
       double taxation conventions (DTCs) leading to a network of agreements cover-
       ing 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 jurisdic-
       tions which includes all of the UK’s 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 program 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.
       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.


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8 – EXECUTIVE SUMMARY

     5.       In cases where the taxpayer’s name is known, access to information for
     international exchange of information (EOI) purposes is ensured through infor-
     mation gathering powers granted in the UK tax law as well as strong sanctions
     and a strong compliance culture. However, a noteworthy shortcoming has been
     identified as the UK cannot currently use its statutory information gathering
     powers for international exchange of information purposes where the name of
     the taxpayer is not known. As a result element B.1 is considered not to be in
     place. The UK should ensure that there is a legal basis to access third party
     information for EOI purposes in line with the standard even in cases where the
     name of the taxpayer cannot be established. The UK should within six months
     of the Global Forum’s adoption of this report provide an intermediate report on
     steps taken to address the recommendations made in this regard.
     6.       With its involvement in developing a very comprehensive network of
     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, receiv-
     ing approximately 1 200 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 should 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.
     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 HMRC’s 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
     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 UK’s 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 informa-
     tion for international tax matters with a large network of jurisdictions across
     the globe.




                  PEER REVIEW REPORT – COMBINED PHASE 1 AND PHASE 2 REPORT – UNITED KINGDOM © OECD 2011
                                                                                        INTRODUCTION – 9




                                         Introduction


Information and methodology used for the peer review of the United
Kingdom

       9.       The assessment of the legal and regulatory framework of the United
       Kingdom (UK) and the practical implementation and effectiveness of this
       framework was based on the international standards for transparency and
       exchange of information as described in the Global Forum’s Terms of Reference
       to Monitor and Review Progress Towards Transparency and Exchange of
       Information For Tax Purposes and was prepared using the Global Forum’s
       Methodology for Peer Reviews and Non-Member Reviews. The assessment
       was based on the laws, regulations, and exchange of information mechanisms
       in force or effect as at June 2011, other information, explanations and materi-
       als 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).
       10.      The Terms of Reference breaks down the standards of transparency
       and exchange of information into 10 essential elements and 31 enumer-
       ated aspects under three broad categories: (A) availability of information;
       (B) access to information; and (C) exchange of information. This combined
       review assesses the UK’s legal and regulatory framework and the implemen-
       tation 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 UK’s 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 also made concerning the UK’s practical application



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10 – INTRODUCTION

      of each of the essential elements. As outlined in the Note on Assessment
      Criteria, following a jurisdiction’s Phase 2 review, a “rating” will be applied
      to each of the essential elements to reflect the overall position of a jurisdic-
      tion. However this rating will only be published “at such time as a representa-
      tive subset of Phase 2 reviews is completed”. This report therefore includes
      recommendations in respect of the UK’s legal and regulatory framework and
      the actual implementation of the essential elements, as well as a determina-
      tion on the legal and regulatory framework, but it does not include a rating of
      the elements.
      11.     The assessment 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.

Overview of the United Kingdom

      12.        The United Kingdom of Great Britain and Northern Ireland
      (commonly known as the United Kingdom, the UK) is located off the north-
      western coast of continental Europe. It is an island nation, spanning an archi-
      pelago including Great Britain, the north-eastern part of the island of Ireland,
      and many smaller islands.
      13.        The UK is the world’s sixth largest economy. In 2009 its
      nominal gross domestic product (GDP) amounted to GBP 1.296 tril-
      lion (EUR 1.53 trillion)1, its population to 61.798 million and its GDP per
      capita to approximately GBP 21 000 (EUR 24 757).2 It is a member of the
      European Union (EU), though not the Economic and Monetary Union, a
      permanent member of the United Nations Security Council, a member of the
      Commonwealth of Nations, the G8 and G20, the Organisation for Economic
      Co-operation and Development (OECD) and the World Trade Organisation
      (WTO). Its ten primary trading partners are (in order) the USA, Germany, the
      Netherlands, China, France, Ireland, Belgium, Italy, Spain and Switzerland.3




1.    The currency of the UK is the Pound Sterling (GBP). In 2010 the average
      exchange rate GBP/USD was 1 GBP = 1.546 USD. As at 22 February 2011,
      GBP 1 = EUR 1.1805. (Source: Bank of England).
2.    Source: IMF World Economic Outlook Database, accessed 20 October 2010.
3.    www.uktradeinfo.com/index.cfm?task=summaryTrade, accessed 31 March 2011.


                    PEER REVIEW REPORT – COMBINED PHASE 1 AND PHASE 2 REPORT – UNITED KINGDOM © OECD 2011
                                                                                        INTRODUCTION – 11



       General information on legal system and the taxation system
       14.         The UK consists of four countries: England, Northern Ireland,
       Scotland and Wales. It is governed by a parliamentary system with its seat of
       government in the capital city of London. There are three devolved adminis-
       trations with varying powers, in Belfast, Cardiff and Edinburgh, the capitals
       of Northern Ireland, Wales and Scotland respectively. Very few areas relevant
       to transparency and international exchange of information for tax purposes
       are devolved to these bodies. Where there are relevant differences between
       the four countries, they are noted and analysed in this report. The UK also
       has a number of Crown Dependencies4 and Overseas Territories5 that are not
       constitutionally part of the UK. They have their own directly elected legisla-
       tive assemblies, administrative, fiscal and legal systems. They are not repre-
       sented in the UK parliament and UK legislation does not normally extend to
       them. They are therefore outside the scope of this review.
       15.        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 clergy6).
       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, unicam-
       eral parliament in Scotland and devolved assemblies in Northern Ireland, and
       Wales are not sovereign bodies and could be abolished by the UK parliament.
       16.        The Prime Minister and Cabinet are formally appointed by the
       Monarch to form Her Majesty’s 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 adminis-
       tered directly by the UK government and parliament on all issues. All parts
       of the UK also have elected local authorities.




4.     The Crown Dependencies Jersey, Guernsey and Isle of Man are all members of
       the Global Forum.
5.     Some of the Overseas Territories, namely Anguilla, Bermuda, British Virgin
       Islands, Cayman Islands, Gibraltar, Montserrat and Turks and Caicos are Global
       Forum members.
6.     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/


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12 – INTRODUCTION

      Legal system
      17.          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, judge-made case law, and inter-
      national 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 agree-
      ment shall have effect “notwithstanding any other enactment”. Secondary leg-
      islation 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.7
      18.        The implementation of EU legislation is based on s. 2(1) of the
      European Communities Act 1972. Based on this law, European law is consid-
      ered 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 imple-
      mentation of EU obligations by means of secondary legislation.
      19.        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
      20.        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 Majesty’s Revenue and Customs

7.    When referring to acts, regulations and schedules the references “section”, “regu-
      lation” and “paragraph” are used respectively. The same convention is applied in
      this report.


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                                                                                        INTRODUCTION – 13



       (HMRC), a government department accountable to the Chancellor of the
       Exchequer. The Commissioners for HMRC are the UK competent author-
       ity 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.
       21.         Under the UK’s tax system, liability to pay taxes on income and
       capital gains is primarily determined by residence status. UK resident compa-
       nies 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 indi-
       viduals, 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 com-
       pany is UK-incorporated or if its central management and control are in the UK.
       22.         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
       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.
       23.        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
       24.         The Companies Act 2006 (Companies Act) forms the primary
       source of UK company law and governs the formation and regulation of com-
       panies. 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 guid-
       ance such as the UK Corporate Governance Code, and case law of the UK
       courts.



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14 – INTRODUCTION

      25.         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.

      Overview of the financial sector and relevant professions8
      26.         The financial industry is of great importance to the UK economy.
      Financial services account for 10.0% of UK GDP, higher than that, for exam-
      ple, in France, Germany, Japan or the United States. Professional services
      closely connected with the financial sector (accounting, legal, management
      consultancy and maritime services) contributed a further 3.9% to UK GDP.
      In total, financial and related professional services account for around 14%
      of the UK’s GDP. This for example compares to 12% contributed by the
      manufacturing sector. Financial services employ more than 1 million people
      (out of 31 million employed in the UK) in all parts of the UK. UK financial
      services in 2009 generated a trade surplus of GBP 40 billion (EUR 47.22 bil-
      lion) and 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).
      27.         The following facts, produced by the industry9, show the signifi-
      cant 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 world’s largest international

8.    Unless otherwise stated, statistics under this section refer to 2009 and are taken
      from www.thecityuk.com/what-we-do/the-research-centre/key-facts-and-figures-
      about-uk-financial-services.aspx.
9.    The City UK – www.ifsl.org.uk/what-we-do/the-research-centre/key-facts-and-
      figures-about-uk-financial-services.aspx.


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                                                                                        INTRODUCTION – 15



                 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 turno-
                 ver, 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.
                 London and the UK are a major international market for account-
                 ing 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.

       Overview of relevant registration and regulatory authorities
       28.     The Financial Services Authority (FSA) is the single statutory
       regulator responsible for the authorisation and supervision of deposit taking,
       insurance and the investment business. It is an independent non-government
       body given statutory powers by the Financial Services and Markets Act 2000
       (FSMA). The FSA is accountable to Treasury Ministers but operationally
       independent of Government, funded entirely by the firms it regulates. The
       FSA is the main statutory regulator (as well as AML/CFT regulator) for the
       financial services industry in the UK and regulates nearly 29 000 firms and
       approximately 165 000 individuals within these firms. It has a range of rule-
       making, investigative, enforcement and disciplinary powers (rules and guid-
       ance can be found in the FSA Handbook).
       29.     All UK companies have to be registered with Companies House,
       an Executive Agency of the Department for Business, Innovation and Skills
       (BIS). The main functions of Companies House are to incorporate and


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16 – INTRODUCTION

      dissolve limited companies; examine and store company information delivered
      under the Companies Act and related legislation; and make this information
      available to the public. Companies House makes sure that registered entities
      provide the necessary information. It examines information to ensure appro-
      priate standards are met before acceptance and then places the information
      on the public record. Companies House has no power or duty to check the
      accuracy of the information given nor does it have any investigative powers.
      However BIS has extensive investigative powers.
      30.      HM Treasury is responsible for the Money Laundering Regula-
      tions 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 prac-
      titioners, independent legal professionals, trust or company service providers,
      estate agents, high value dealers and casinos.
      31.     Businesses regulated under the Money Laundering Regulations 2007
      are supervised by various authorities depending on the type of business they
      conduct:
              Financial Services Authority (FSA): credit and financial institutions
              authorised by the FSA;
              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 ser-
              vice businesses, trust and company service providers, auditors, account-
              ants and tax advisers not supervised by another body (including FSA).
      32.         The FSA takes enforcement actions against firms and individu-
      als for 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.
      33.        Charities play an important role in the UK society. The Charity
      Commission for England and Wales is a Non-Ministerial Government Depart-
      ment responsible for the support and supervision of charities. Similar commis-
      sions have been established in Northern Ireland and Scotland.




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                                                                                        INTRODUCTION – 17



Recent developments

       34.       A new Mutual Assistance Directive was adopted by the European
       Council on 15 February 2011 and will come into force on 1 January 2013.
       35.        In June 2010, the UK announced plans to reform the financial
       regulatory framework to provide the Bank of England with control of macro-
       prudential 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.
       36.         In July 2011, the UK Parliament passed legislation in Finance Act
       2011 regarding HMRC’s information gathering powers. The new legisla-
       tion provides powers to allow access to information where the name of the
       taxpayer is not known in EOI cases where there is a serious prejudice to the
       assessment and collection of tax. Importantly, the new powers, once they
       come into force in April 2012 will apply from then on, in relation to tax,
       regardless of whether the tax became due before, on or after 2012 The new
       legislation also modernises powers to obtain bulk bank information (interest
       payments) including for EOI purposes and strengthens the power to require a
       legal or nominee holder of shares or securities to provide ownership details.
       37.         Until that legislation comes into force, the UK cannot use its statu-
       tory information gathering powers for international exchange of information
       purposes where the name of the taxpayer cannot be established (although it
       can exchange information already held by HMRC or which was provided vol-
       untarily). These powers, which are provided for in paragraph 5 of Schedule
       36, can only be used for domestic tax purposes. This results in a limitation
       to accessing third party information which cannot be considered to be to the
       international standard.
       38.        The UK authorities have also announced that they will extend
       access to information where the name of the taxpayer is not known, even in
       the absence of a serious prejudice to the assessment and collection of tax.
       Consultations are currently underway on how to implement this change prior
       to introducing the Bill.




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                                COMPLIANCE WITH THE STANDARDS: AVAILABILITY OF INFORMATION – 19




                       Compliance with the Standards




A. Availability of information



Overview

       39.         Effective exchange of information requires the availability of relia-
       ble 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
       jurisdiction’s competent authority may not be able to obtain and provide it
       when requested. This section of the report describes and assesses the UK’s
       legal and regulatory framework on availability of information. It also assesses
       the implementation and effectiveness of this framework.
       40.         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 infor-
       mation 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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      41.        The legal and regulatory framework for the maintenance of own-
      ership and identity information is in place in the UK. However, UK compa-
      nies can issue bearer shares. They are said to be rare but no statistics exist.
      Nevertheless, no instances of bearer shares were found in the course of the
      review and some mechanisms are in place where the identities of persons
      holding bearer shares would have to be established.
      42.        UK law allows for the creation of trusts under common law and
      statute and the UK is a party to the Hague Convention on the Law Applicable
      to Trusts and on their Recognition.10 The mechanisms in place in the UK
      ensure the availability of identity information regarding the trustees, settlors
      and beneficiaries of trusts, whether UK or foreign law trusts, where signifi-
      cant elements of the trust such as a resident professional trustee or a settlor,
      have a sufficient nexus with the UK.
      43.        Mutual societies and collective investment schemes (CIS) can also
      be formed under UK law. The legislation governing these entities ensures that
      ownership and accounting information is required to be maintained. Some
      mutual societies and CISs may be subject to additional regulatory require-
      ments to keep relevant information.
      44.         UK company, partnership and trust law together with tax law, pro-
      vide in most cases necessary requirements to maintain sufficient accounting
      records that correctly explain all transactions, enable the financial position
      of the entity or arrangement to be determined with reasonable accuracy and
      allow financial statements to be prepared. Such records must be accompanied
      by underlying documentation and must be kept for at least five years.
      45.         Bank information must be maintained in accordance with the laws
      relating to financial institutions and anti-money laundering laws.
      46.         There are strong regulatory mechanisms in place whereby all
      significant industries are subject to close oversight for compliance with the
      variety of laws in place in the UK. Significant efforts are made to liaise closely
      with record-keepers to ensure systems are maintained in a way that meets the
      requirements of UK legislation. The UK authorities have a risk-based approach
      assuring a high level of compliance by all sectors relevant to this review.
      47.         There is a range of sanctions available under each of the relevant
      laws to ensure that ownership and accounting 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 propor-
      tionate to the nature and level of a breach of these laws. These penalties are
      dissuasive enough to ensure compliance, even by legal persons. With the
      exception of one case where poor retention practice of a bank was mentioned,

10.   www.hcch.net/index_en.


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                                COMPLIANCE WITH THE STANDARDS: AVAILABILITY OF INFORMATION – 21



       the UK’s 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.

A.1. Ownership and identity information
 Jurisdictions should ensure that ownership and identity information for all relevant
 entities and arrangements is available to their competent authorities.


       Companies (ToR11 A.1.1)
       48.       The main types of UK companies are:
             ·   public limited company (PLC): A PLC has share capital and limits
                 the liability of each member to the amount unpaid on their shares.
                 It may offer its shares for sale to the general public and may also be
                 quoted on a regulated market. It must have at least two shareholders;
             ·   private company limited by shares: This type of company has
                 share capital and the liability of each member is limited to the
                 amount, if any, unpaid on their shares. It cannot offer its shares for
                 sale to the general public. It can have one or more shareholders;
             ·   private unlimited companies may or may not have share capital but
                 there is no limit to the members’ liability. They have to disclose less
                 information than other types of companies;
             ·   private company limited by guarantee: This type of company does
                 not have share capital and its members are guarantors rather than
                 shareholders. The members’ liability is limited to such amount as the
                 members undertake to contribute to the assets of the company; and
             ·   European company (Societas Europaea, SE): SEs are regulated
                 by EU Council Regulation (EEC) No. 2157/2001 on Statute for a
                 European Company and transposed in the UK through the European
                 Communities Act 1972. Pursuant to Article 9(1)(c)(ii) of the Council
                 Regulation, the rules regarding UK PLCs apply equally to SEs.
       49.     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
       10 000 public limited companies, 6 500 private unlimited companies and 24
       SEs. Further, as of November 2010, 10 373 overseas companies (i.e. companies
       incorporated outside the UK) were registered with Companies House.

11.    Terms of Reference to Monitor and Review Progress Towards Transparency and
       Exchange of Information.


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      Ownership information held by government authorities

      Information held by Companies House
      50.      All UK companies have to be registered with Companies House
      (Part 2, Companies Act). On application for registration, UK companies must
      provide a Memorandum of Association,12 a Statement of Capital and Initial
      Shareholdings or a Statement of Guarantee including information necessary
      to identify the subscribers (name and authentication through a signature or –
      for electronic incorporations – a code). Thus, a full list of subscriber details
      has to be provided on incorporation for all companies. Further, companies
      have to deliver a Statement of Proposed Officers including name and address
      of the officers of the company.
      51.     All UK companies are required to submit an annual return to
      Companies House (Part 24, Companies Act). The return of UK non-traded
      companies13 must contain “[t]he name (as it appears in the company’s regis-
      ter of members) of every person who was a member of the company at any
      time during the return period” S.856A(2). Further, the return has to state the
      number of shares held by each owner (s. 856A(3)). UK-traded companies must
      send an annual return providing the names and addresses of persons holding
      more than 5% of the shares (s. 856B).
      52.      Compliance with requirements to file annual returns in the UK is gen-
      erally high. The latest statistics (November 2010) show that compliance with
      requirements to file annual returns stood at 97.48%. This is closely monitored.
      For the first seven months of the year 2010/2011, Companies House imposed
      in total 127 998 penalties for non-filing of accounts and annual returns.
      53.     Under the Overseas Companies Regulations 2009 overseas compa-
      nies have to register if they have some degree of physical presence in the UK
      (such as a place of business or branch) through which they carry out business.
      They have to supply a certified copy of the company’s constitutional docu-
      ments. Further, they have to supply details of inter alia directors or persons
      authorised to represent the company. However, no ownership information has
      to be provided.
      54.      Companies House is required by law to maintain information held in
      the register indefinitely. Where a company has been dissolved or a registered
      overseas company has ceased to have any connection with the UK, records

12.   The memorandum of association is a statement made by each subscriber con-
      firming their intention to form a company and become a member of that com-
      pany (and – for companies with share capital – to take at least one share).
13.   “A “non-traded company” means a company none of whose shares are shares
      admitted to trading on a regulated market.” (s. 855(4) Companies Act).


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       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 elec-
       tronic information indefinitely.

       Businesses regulated by the Financial Services Authority (FSA)
       55.      Any person who carries on a regulated activity in the UK must be
       either authorised by the FSA or exempted from authorisation (s. 19 FSMA).
       Regulated activities are defined in Part II of the Regulated Activities Order
       2001 (RAO) and include activities such as: accepting deposits, effecting or car-
       rying out contracts of insurance as principal, dealing in investments (as princi-
       pal or agent), arranging deals in investments, managing investments; assisting
       in the administration and performance of a contract of insurance; establishing,
       etc.collective investment schemes or stakeholder pension schemes.
       56.      Close links by way of owning or controlling 20% or more of capital or
       voting rights of regulated firms have to be disclosed at time of authorisation
       (Schedule 6 to FSMA and FSA Handbook, Supervision 16.5). Information
       required includes inter alia the name and address of the close link. Acquiring
       significant control and otherwise crossing certain thresholds of ownership of
       a regulated business must be disclosed to the FSA, which can either approve
       or deny the acquisition (ss. 178-187 FSMA). Significant control is defined as
       control arising as a result of holding 10% or more of the shares in a regulated
       business or its parent undertaking; control arising as a result of the entitlement
       to exercise, or control the exercise of, voting power in a regulated business or
       its parent undertaking. A person must also notify the FSA of any subsequent
       changes in control, either increase or reduction, where a person’s ownership
       or control in shares of a regulated business or its parent undertaking crosses
       certain thresholds (10%, 20%, 33% and 50%).

       Information held by CREST
       57.      The register of legal title to shares of UK companies which are issued
       in uncertificated (dematerialised) form is constituted by the entries in the
       CREST system, the UK’s clearing and settlement system (regulation 20 of
       the Uncertificated Securities Regulations 2001, USRs), which is operated
       by Euroclear UK and Ireland Limited (EUI). CREST allows uncertificated
       (dematerialized) shares to be held and transferred electronically. Records
       of the owners of the shares held in the system, as well as details of all share
       transfers for stamp duty purposes are required to be held. EUI is obliged
       to enter on the register the names and addresses of the members who own
       uncertificated shares in the company and a statement of the uncertificated
       shares held by each member (paragraph 4 Schedule 4 USR). Any entry relat-
       ing to a member of the company who has ceased to hold uncertificated shares



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24 – COMPLIANCE WITH THE STANDARDS: AVAILABILITY OF INFORMATION

      in it may be removed by EUI from the register after the expiration of a period
      of 10 years beginning with the day on which he ceased to hold shares.

      Information held by HMRC
      58.     A company is required to give notice to HMRC when it begins any
      business activity, such as starting to trade, receiving income, or acquiring or
      disposing of assets, and when it re-commences activities which are subject to
      taxation (s. 55 Finance Act 2004). When giving this notice, the company is
      required to provide specific information, including the full name and address
      of each of the directors of the company.
      59.      A company is required to deliver a company tax return if it is served
      with a notice to do so (para. 3, Schedule 18 to the Finance Act 1998). A com-
      pany which does not receive a notice but which is chargeable to tax for a period
      is required to give “notice of chargeability” to HMRC (para. 2, Schedule 18).
      Foreign companies operating in the UK through a permanent establishment and
      within the charge to UK corporation tax are required to file tax returns in the
      same manner as domestic companies. However, company tax returns do not
      require mention of ownership information.
      60.    The current practice is for HMRC to retain company tax returns for
      a minimum of 20 years.
      61.  Companies may also need to register with, and submit returns to,
      HMRC for VAT purposes.

      Ownership information held by companies

      Companies in general
      62.     Every UK company is required to maintain a register of members
      (chapter 2 of Part 8 Companies Act). The register must inter alia contain the
      names and addresses of the members as well as dates on which they became
      or ceased to be members. However, this will not include owners of bearer
      shares or the beneficial owners of shares held by nominees (see further
      below). The company’s register of members must contain information about
      members for a period of 10 years after the date at which they have ceased to
      be a member (s. 121, Companies Act).
      63.      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 infor-
      mation gathered as a result of issuing a “section 793 notice” for at least six



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       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.
       64.      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
                 company14 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 negli-
                 gible, any unrelieved management expenses and charges arising prior
                 to the change in ownership may not be carried forward to an account-
                 ing period after the change in ownership (ss. 677 and 692); and
                 where there is more than a 50% change in the ownership of a com-
                 pany 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).
       65.   The above requirements to keep ownership information apply to UK
       companies as well as foreign-incorporated but UK-resident companies.
       66.     Corporation tax returns may be taken up by HMRC for enquiry
       on a risk-assessment basis. For the purposes of these provisions, HMRC
       regularly enquires into companies’ tax returns where information held would
       indicate that the above provisions apply (for instance, where press releases,

14.    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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      newspaper articles or notes to the company’s accounts indicate that a change
      of ownership has taken place). Compliance with these provisions will also be
      monitored routinely during enquiries into a company’s tax return if relevant.
      For larger groups, enquiries will likely occur every year. Tax managers and
      accountants are aware of these obligations.

      Publicly traded companies
      67.      In addition to requirements under company law, the FSA’s Disclosure
      and Transparency Rules (DTR) require shareholders of UK public companies
      to notify the company, and the UK Listing Authority (if the shares are traded
      on a regulated market), when their interests reach, exceed or fall below 3%
      and at 1% thresholds thereafter. For this purpose, the FSA Handbook Glossary
      defines “shareholder” much wider than the Companies Act and would include
      not only the registered holder of the shares but also their beneficial owner. A
      notification has to include the resulting situation in terms of voting rights; the
      chain of controlled undertakings through which voting rights are effectively
      held; the date on which the threshold was reached or crossed; and the identity
      of the shareholder and of the person entitled to exercise voting rights on behalf
      of that shareholder.

      Service providers
      68.      HM Treasury is responsible for the UK Money Laundering Regula-
      tions 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 prac-
      titioners, independent legal professionals, trust or company service providers,
      estate agents, high value dealers and casinos.
      69.      The term “financial institution” covers inter alia a person whose regu-
      lar occupation or business is the provision investment services or the perfor-
      mance of an investment activity by way of business (regulation 3(3)(b), MLR).
      The term “trust or company service providers” covers all persons or firms
      providing these services by way of business.15 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

15.   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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       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, corre-
       spondence 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)).
       70.      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 meas-
       ures 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).
       71.      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 infor-
       mation 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.

       Nominees
       72.     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).


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      73.      Carrying on a business as a nominee shareholder or nominee director
      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).
      74.     Nominees not acting by way of business are not covered by UK AML
      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
      75.     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.
      76.      Companies incorporated in another jurisdiction but centrally man-
      aged 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 informa-
      tion 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
      information for foreign incorporated companies which were centrally man-
      aged and controlled from within the UK. Nevertheless, as there are no direct
      mechanisms that assure that ownership information is available for such com-
      panies, 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.



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       Bearer shares (ToR A.1.2)
       77.      The Companies Act (s. 122) allows all types of companies to issue
       ‘share warrants to bearer’ or ‘stock warrants to bearer’, provided the com-
       pany’s Articles of Association16 allow it. Despite their name, “share warrants
       to bearer” have the essential properties of “bearer shares”. The name of the
       owners of such bearer securities are not recorded in the register of the company.
       They can be sold without any necessity to notify the company. The UK authori-
       ties advise that, generally, companies will require that the holder of a security
       be identified in order to be able to vote, receive notices, and receive interest
       dividends or other payments. However, this is not an absolute requirement.
       78.   There are some limitations in the issuance of bearer shares and some
       mechanisms under which owners of bearer shares have to be identified:
                 bearer shares may not be admitted to the CREST system and shares
                 traded on the London Stock Exchange are required to be eligible for
                 electronic settlement (s. 1.7 London Stock Exchange’s Admission and
                 Disclosure Standards) and thus cannot be in bearer form;
                 owners of shares, including bearer shares, in companies admitted
                 to market in the UK, are subject to notification requirements which
                 inter alia require periodic financial reporting and major sharehold-
                 ing notifications to both the company and the UK Listing Authority
                 when their interests reach, exceed or fall below 3% and at 1% thresh-
                 olds thereafter. A notification has to include the resulting situation in
                 terms of voting rights; the chain of controlled undertakings through
                 which voting rights are effectively held; the date on which the thresh-
                 old was reached or crossed; and the identity of the shareholder and of
                 the person entitled to exercise voting rights on behalf of that share-
                 holder (DTR 5.8, FSA Handbook);
                 for public companies the owners of bearer shares may to some degree
                 be ascertained using section 793 of the Companies Act, though it is
                 unclear in the case of bearer shares how the company would know
                 whom to send the section 793 notice to; and
                 service providers subject to AML are required to identify the owners
                 of bearer shares in the course of conducting customer due diligence.
       79.      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

16.    A company must have articles of association prescribing regulations for the com-
       pany (s. 18 Companies Act).


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      are rarely used”.17 The FATF’s 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.18 Therefore, there may be circumstances where such
      shares exist and in those cases information concerning their owners may not
      be available. The UK’s competent authority for international exchange of
      information in tax matters does not recall ever having received a request for
      information regarding bearer shares.

      Conclusion
      80.    Even though share warrants to bearer are reportedly rare, where such
      warrants exist information concerning their owners may not be available.

      Partnerships (ToR A.1.3)
      81.     The legislative framework in the UK provides for three types of
      partnerships:
              general partnerships: the Partnership Act 1890 provides that all
              partners in a general partnership have unlimited liability for the firm’s
              debts and obligations and can participate in the running of the firm. A
              partnership is defined as “the relation which subsists between persons
              carrying on a business in common with a view of profit” (s. 1, Partner-
              ship Act);
              limited partnerships: This type of partnership can be formed under
              the Limited Partnerships Act 1907. Such partnerships are formed by
              registration with Companies House and must include at least one gen-
              eral partner with unlimited liability and at least one limited partner
              whose liability is limited to their initial contribution and who does
              not have management authority. The Act also applies the Partnership
              Act to limited partnerships; and
              limited liability partnerships (LLPs): These partnerships can be
              formed under the Limited Liability Partnerships Act 2000 (England,
              Wales and Scotland) or the Limited Liability Partnerships Act (North-
              ern Ireland) 2002. LLPs have a flexibility similar to other forms of
              partnerships, but are bodies corporate with legal personality and limited

17.   Gower’s Principles of Modern Company Law, 6th edition, as quoted in the 2007
      FATF-report on the UK.
18.   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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                 liability of its members for debts of the LLP. The LLP is therefore sub-
                 ject to certain requirements under company law, such as in relation to
                 accounts and audit.
       82.      Scottish partnerships have legal personality separate from the part-
       ners (s. 4(2), Partnership Act). However, like other UK partnerships, they are
       transparent for tax purposes.
       83.       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 oper-
       ate 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).
       84.    Companies House statistics show that, as of February 2011, there
       were approximately 18 500 registered limited partnerships, 45 500 LLPs and
       236 EEIGs. Currently, 520 900 general partnerships are registered with the
       HMRC for tax purposes, including 379 200 two-person partnerships.19

       Ownership information held by government authorities

       Registration with Companies House
       85.     General partnerships (i.e. those formed under the Partnership Act) are
       not registered with Companies House. The same applies to Scottish general
       partnerships even though they have legal personality.
       86.      Limited partnerships are required to register with Companies House.
       They have to provide the full name of each general and limited partner when
       first registered with Companies House and to notify the registrar of any part-
       ners who subsequently leave or join (ss. 8-9, Limited Partnership Act).
       87.      Limited liability partnerships are required to register with Companies
       House. They have to provide the full name and address of each partner when
       first registered with Companies House, and to notify Companies House of
       any changes to membership (s. 2 and s. 9, Limited Liability Partnerships Act).
       They are required to submit annual returns to Companies House (Part 8, 2009
       LLP Regulations) including particulars of their partners.
       88.   European economic interest groupings are required to register in the
       Member States of the EU where their official address is situated. In the UK,

19.    The Department for Business estimates that there are approximately 2.8 million
       sole traders in the UK.


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      an EEIG has to register with Companies House. It must submit information
      through the registration form and a copy of its contract of formation which
      has to include inter alia the names, business names and legal form of each
      member (Art. 5(d), Council Regulation (EEC) No. 2137/85).
      89.     Foreign limited partnerships cannot register with Companies House
      unless their principal place of business is situated or proposed to be situated
      in the UK (s. 8 Limited Partnership Act).
      90.      The Limited Partnerships Act 1907 does not provide for information
      relating to limited partnerships to be removed from the register. Information
      regarding LLPs has to be retained until the LLP is dissolved. In practice,
      information registered with Companies House is kept indefinitely.

      Information provided to the tax administration
      91.      UK resident partners are taxable on profits and gains whether
      UK-source income or not. Non-resident partners will be liable to tax on trade
      or professional profits and gains arising from activities carried on in the
      UK. The Taxes Management Act 1970 (TMA) requires anyone chargeable
      to UK income or capital gains tax for a particular tax year to give notice of
      chargeability, i.e. inform HMRC that they are liable to income and/or capital
      gains tax, if they have not received an HMRC notice to file a return for that
      year (s. 7, TMA). Under s. 12AA and s. 12AB, all types of partnerships are
      required to file a Partnership Tax Return with HMRC, including a partner-
      ship statement, if HMRC has issued the partnership with a notice to do so.
      The partnership has to nominate one of the partners to do this. The partner-
      ship tax return includes inter alia details of all the present partners, and for
      those that have left or joined during the period covered by the return, the
      period for which they were partners (s. 12AA(6)).
      92.      As with partnerships, EEIGs are tax transparent. Under s. 12A of the
      TMA, HMRC may require an EEIG to submit an ordinary partnership tax
      return, including details on partners, together with its accounts.
      93.    A partnership or an EEIG may have to register for value-added tax
      (VAT) purposes. Details of all the partners must be provided to HMRC on
      form VAT 2 (partnership details).
      94.      The above rules regarding notification of chargeability and filing of
      partnership returns apply equally to foreign partners and partnerships with a
      liability to UK income and capital gains tax.
      95.   HMRC’s current practice is to retain partnership tax returns for a
      minimum of six years.




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       Ownership information held by service providers
       96.      AML and FSMA rules on CDD and record retention obligations
       described above for companies apply equally in the case of partnerships. In the
       case of a partnership (other than an LLP), “beneficial owner” is defined as “any
       individual who (a) ultimately is entitled to or controls (whether the entitlement
       or control is direct or indirect) more than a 25% share of the capital or profits
       of the partnership or more than 25% of the voting rights in the partnership; or
       (b) otherwise exercises control over the management of the partnership (regula-
       tion 6 (2), MLR).

       Ownership information held by partners
       97.      There are no specific obligations for a general or limited partnership
       to keep a register of its partners. However, UK partnerships would commonly
       draw up a partnership agreement or deed, setting out the conditions of the
       partnerships and the terms of conduct, which would be signed by all the part-
       ners (although this is not a requirement). The partners in a limited partnership
       will also have to hold necessary information in order to inter alia comply
       with the obligation to provide names of partners to Companies House.
       98.      Limited liability partnerships are specifically required to keep a
       register of partners (part 5, Limited Liability Partnerships (Application of
       Companies Act) Regulations 2009). The register must include the name and
       address of each partner.
       99.      In order for the partnership tax return to be completed, the partner
       nominated as having the responsibility to create and file this return must hold
       information on the partners (s. 12AA, TMA). Further, if a general or limited
       partnership or a firm or entity of a similar character carries on business under
       a name that is not comprised of the names of all partners then it must provide
       the name and address of each partner in its business correspondence and in
       signs at premises accessible to its customers or suppliers (part 41, s. 1200 and
       s. 1201, Companies Act).
       100.   Due to its obligation under tax law, partnerships must maintain infor-
       mation about partners for a minimum of five years (s. 12B, TMA).

       Conclusion
       101.     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.




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      Trusts (ToR A.1.4)
      102.     UK law allows for the creation of trusts. Further, the UK is a party
      to the Convention on the Law Applicable to Trusts and on Their Recognition
      1985 (Hague Convention).20 The extent to which information in respect of
      trusts has to be held within the UK does not depend on the law governing the
      trust but on whether there are UK trustees, settlors and beneficiaries.
      103.     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.
      104.     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 spe-
      cial 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.

      Information submitted to authorities under tax laws
      105.   Both the TMA and the Inheritance Tax (IHT) Act 1984 require
      information concerning the trustees, settlors and beneficiaries of trusts to be
      submitted to HMRC.

      Income tax
      106.    For tax purposes, trustees are deemed to be a single person, with tax-
      ation 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 resi-
              dent or domiciled in the UK.



20.   www.hcch.net/index_en.php?act=conventions.text&cid=59, accessed 10 March
      2011.


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       107.     Where a trust is considered UK resident, the UK asserts taxing rights
       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.
       108.   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
                 Gains Act 1992 schedule 5A, as amended by s. 97, Finance Act 1994);
                 and
                 UK-resident and non-resident trustees must notify HMRC of their
                 chargeability to income and capital gains tax when they expect the
                 trust to be chargeable to tax (s. 7, TMA).
       109.   Also, information has to be provided when assets are distributed,
       or on cessation if there are potential inheritance tax or capital gains tax
       consequences.
       110.     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.
       111.      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 prac-
       tice is to require trustees to complete a full return only once every five years
       (s. 8A, TMA 1970)21




21.    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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      112.    The Trust and Estate Tax Return – SA900 – contains inter alia the
      following information:
              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 ben-
              eficiaries;
              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.
      113.   Trust and Estate Tax Returns are retained by HMRC for six years and
      41G (Trust) forms are kept indefinitely.

      Inheritance tax
      114.     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 ordinar-
      ily 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 informa-
      tion 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.
      115.    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.

      Information held by trustees
      116.     Under common law, for a non-charitable trust to be valid, the trust
      needs to meet the three certainties: the certainty of intention, the certainty
      of subject matter and the certainty of object. This means that a trust is only
      valid if evidenced by a clear intention on behalf of the settlor to create a trust,
      clarity as to the assets that constitute the trust property and identifiable ben-
      eficiaries (Knight v. Knight (1849) 3 Beav 148). A written declaration of trust
      may not exist or not identify the settlor on the face of the document. However,



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       trustees have a duty of care to act in accordance with the wishes of the settlor.
       As a matter of good practice trustees would keep sufficient records to enable
       them to perform their duties.
       117.     Trustees should obtain “good receipt” from beneficiaries when they
       distribute trust property. This requires trustees inter alia to establish that
       the person receiving the trust property is the correct beneficiary of the trust
       property being distributed (Evans v. Hickson (1861) 30 Beav 136 and Re
       Hulkes (1886) 33 Ch D 552). Further, trustees of a trust taxable in the UK
       will be required to know the identity of the settlor and beneficiaries in order
       to comply with tax requirements and file a complete and correct tax return.
       118.     Under s. 21(3) of the Limitation Act 1980, there is a six year limita-
       tion period for breach of trust. Therefore, trustees would generally retain
       all relevant documents relating to the trust for six years. Where trustees are
       required to have identity information for tax or AML purposes they have to
       retain information for a minimum of five years.
       119.    AML and FSMA CDD and retention obligations, as described previ-
       ously in section A.1.1, apply equally to trust and company service provid-
       ers. These professionals are obliged to conduct CDD. MLR regulation 6(3)
       defines “beneficial owner” in the case of a trust as:
                 any individual who is entitled to a specified interest in at least 25%
                 of the capital of the trust;
                 the class of persons in whose main interest the trust is set up or oper-
                 ates; and
                 any individual who has control over the trust.

       Information held based on charity legislation
       120.     Many charities take the form of a trust. The trust then exists for
       charitable purposes rather than for the benefit of named persons. It is sub-
       ject to both trust and charity law. Specific legislation for charities and the
       availability of ownership and identity information is dealt with under ‘Other
       relevant entities and arrangements’.

       Conclusion
       121.     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


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      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.
      122.    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
      information would have to be available in the jurisdiction where the trustee is
      located as the relevant records would be situated there.

      Foundations (ToR A.1.5)
      123.    UK law does not recognise foundations.

      Other relevant entities and arrangements
      124.    Under UK law, several types of mutual entities and collective invest-
      ment schemes, as well as charities, can be formed. Some of these entities will
      take the form of companies or trusts and are then subject to the rules that
      apply to such entities regarding registration, record keeping and sanctions.

      Mutual societies
      125.    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 socie-
      ty’s main purpose is to assist members financially during sickness, unemploy-
      ment 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.
      126.     All mutual societies have to register with the FSA.22 Also, as separate
      legal entities they have to submit corporate tax returns with the HMRC on the

22.   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


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       same basis as companies. Financial mutuals are regulated under the MLR,
       although certain mutual financial undertakings (i.e. those with small invest-
       ment businesses) are exempt (regulation 4(1), MLR). Thus, they are required
       to undertake CDD on their members. Members have to be registered.23

       Investment trusts and collective investment schemes (CISs)
       127.     Collective investment schemes (CIS) may be authorised or unauthor-
       ised. Authorised collective investment schemes can either be authorised unit
       trusts (AUTs) or open-ended investment companies (OEICs). The authorising
       body is the FSA. Unauthorised CIS are generally unit trusts.24 A foreign CIS
       that meets certain specified criteria may be “recognised” by the FSA for the
       purpose of marketing to the public in the UK.
       128.     Authorised CISs (AUTs and OEICs) are regulated as Undertakings
       for Collective Investment in Transferable Securities (UCITS), non-UCITS
       retail schemes (NURS) or Qualified Investor Schemes (QIS). While unau-
       thorised CISs are not constrained by these regulations, their managers are
       required to be authorised under Part IV of FSMA 2000.
       129.    OEICs are companies whereas AUTs are not, but both are treated
       as companies for income tax purposes. Both types are required to submit
       Corporate Tax returns on the same basis as companies. Unauthorised UTs are
       required to submit Trustee Tax Returns to HMRC on the same basis as trusts.
       130.    For AUTs, the manager and trustee must file a copy of the trust deed
       with the FSA. UK OEICs must file a copy of the company’s instrument of
       incorporation (s. 12, OEIC Regulations and s. 242, FSA 2000). An application
       for authorisation must include details of the directors for authorised OEICs
       and must include details of managers and trustees for AUTs.
       131.     The FSA maintains a register of all firms and individuals that fall
       under its regulatory jurisdiction including those permitted to act as operators
       or trustee/depositary for CIS. It also maintains a register of all authorised CIS.
       For an AUT, the FSA maintains, at a minimum, the type of scheme, its name
       and unique reference number, the name and address of the manager and the
       trustee of the scheme. For an authorised OEIC; the name and address of the
       company, the type of scheme, its unique reference number, its directors and

       196; s. 2 IPS Act 1965. IPSs and Credit Unions in Northern Ireland register with
       the Department of Enterprise, Trade and Investment (DETI).
23.    Schedule 2 para. 13 Building Societies Act 1986; Schedule 3 para. 14 Friendly Soci-
       eties Act 1992; s. 1 Credit Unions Act 1979, s. 44 Industrial and Provident Societies
       Act 1965.
24.    www.duslaw.eu/files/Alternative%20Investments.pdf, www.hmrc.gov.uk/collec-
       tive/what-is.htm.


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40 – COMPLIANCE WITH THE STANDARDS: AVAILABILITY OF INFORMATION

      its depositary are kept. Finally, for a recognised scheme; details are kept of the
      operator of the scheme and any representative of the operator in the UK.
      132.    The director of an authorised OEIC or manager or the trustee of an
      AUT must establish and maintain a register of unitholders, including names
      and address for all units other than those represented by bearer shares and
      the number of units of each class currently in issue, including bearer shares
      and the number of units of those bearer certificates (Schedule 3(5) to the
      Open-Ended Investment Companies Regulations 2001 and rule 6.6.4 of
      the Collective Investment Schemes Sourcebook in the FSA Handbook).
      Unauthorised unit trusts and their trustees are subject to the same rules previ-
      ously presented in section A.1.4 of this report for trusts.
      133.    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 reason-
      able 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).
      134.    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.

      Charities25
      135.     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 charity’s trustees are the people jointly responsible
      for administering a charity. If they have an annual income over GBP 5 000

25.   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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       (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 pro-
       vide 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.
       136.     Statistics show that there are currently 180 658 charities registered
       with the Charity Commission. Annual returns are filed by registered chari-
       ties on time (82.7% of the time) or within a year after the end of the financial
       year (94.8%). Where a Trustee’s Annual Report and accounts have to be
       filed, compliance for this is at 84.70% and 95.2% respectively. The Charity
       Commission advises that it currently holds the latest due accounts for over
       99% of the sector’s income.

       Enforcement provisions to ensure availability of information
       (ToR A.1.6)
       137.    The existence of appropriate sanctions for non-compliance with key
       obligations is an important tool for jurisdictions to effectively enforce the
       obligations to retain identity and ownership information. Appropriate sanc-
       tions are in place in UK legislation to enforce identity and ownership record
       keeping and filing obligations:

       Companies Act
       138.      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 2009-2010 Companies House
       fined 230 000 private limited companies with GBP 110 million (EUR 130 mil-
       lion) and 1 075 public limited companies with GBP 2.5 million (EUR 2.95 mil-
       lion) for late filing of accounts.
       139.    Companies House makes sure that registered entities provide the
       necessary information. It examines information to ensure appropriate stand-
       ards 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 com-
       panies 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


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42 – COMPLIANCE WITH THE STANDARDS: AVAILABILITY OF INFORMATION

      where the company’s management refuses to co-operate or there is a risk that
      documents may be destroyed.
      140.    Where a UK company fails to maintain a register of its members,
      this constitutes an offence for both the company and officers of the com-
      pany. 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).
      141.    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 sum-
      mary 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 pre-
      scribed 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).

      Uncertificated securities legislation (CREST)
      142.    Euroclear UK and Ireland Limited is, according to the Uncertificated
      Securities Regulations 2001, obliged to enter on the register of uncertificated
      shares the names and addresses of members holding uncertificated shares in
      the CREST system. Default in complying with this obligation is sanctioned
      under section 113 of the Companies Act. A person guilty of an offence
      under this section is liable on summary conviction to a fine not exceeding
      GBP 1 000 (EUR 1 180) and, for continued contravention, a daily default fine
      not exceeding GBP 100 (EUR 118) (s. 113(8), Companies Act).

      Partnership law
      143.    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 part-
      nerships with more than GBP 2.5 million (EUR 2.95 million) for late filing
      of accounts.
      144.     An LLP which fails to maintain a register of members (part 5, Limited
      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).



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       145.     The LLP and its designated members are liable to a fine not exceeding
       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 con-
       tinued contravention.
       146.     A person guilty of an offence in relation to s. 1200 and s. 1201 of the
       Companies Act (using partner’s names when communicating with public) is
       liable on summary conviction to a fine not exceeding GBP 1 000 (EUR 1 180)
       and, for continued contravention, a daily default fine not exceeding GBP 100
       (EUR 118).

       Tax law
       147.     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 part-
       nership 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).
       148.      The penalty for failing to give notice of chargeability for corporation
       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.
       149.     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.
       150.    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


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44 – COMPLIANCE WITH THE STANDARDS: AVAILABILITY OF INFORMATION

      GBP 3 000 (EUR 3 542) multiplied by the number of members of the group-
      ing at the time of the delivery (s. 98B, TMA, as amended by paragraph 2,
      Schedule 11 to Finance Act 1990)
      151.     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 GBP 300
      (EUR 354) and a further penalty of GBP 60 (EUR 71) per day until the notifi-
      cation is made (s. 245A, Inheritance Tax Act 1984).

      Financial Services and Markets Act 2000 (FSMA)
      136.    Any person who carries on a regulated activity in the UK without
      being authorised by the FSA or being exempted (s. 19 FSMA) may be pun-
      ishable on indictment by a maximum term of two years imprisonment and/
      or a fine. Further, a person who fails to disclose close links (Schedule 6 to
      FSMA) is guilty of an offence and is liable on summary conviction to a fine
      not exceeding GBP 5 000 (EUR 5 900) (s. 191).
      136.     If shareholders in a public company do not comply with the “3%-noti-
      fication requirement”, the FSA may impose a penalty of such amount as the
      FSA considers appropriate on, or publicly censure any person or its directors
      knowingly violating these provisions (s. 91).

      Money Laundering Regulations 2007
      152.    The MLR provide for a range of civil and criminal penalties for
      breaches of the regulatory requirements (regulations 42 and 45). On criminal
      conviction in the higher courts on indictment penalties can include unlimited
      fines and up to two years imprisonment. Records required to be kept under
      MLR have to be retained for five years after the transaction took place or the
      business relationship ended (regulation 19 MLR).

      Conclusion
      153.    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.
      154.     In a small number of areas (most notably with respect to partnerships
      not filing documents with Companies House) the size of the applicable pen-
      alty appears low. However, the UK has strong regulatory authorities (includ-
      ing Companies House) with active inspection or monitoring programs. This



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       likely underpins the rather high compliance rate which authorities indicate all
       types of entities demonstrate. The compliance culture is complemented by the
       HMRC’s broad powers to compel the production of information from natural
       and legal persons (see Section B of this report).
       155.   With the exception of one case where poor retention practice of a
       bank was mentioned, the UK’s 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.

                  Determination and factors underlying recommendations

                                       Phase 1 determination
        The element is in place, but certain aspects of the legal implementation
        of the element need improvement.
                  Factors underlying
                  recommendations                                Recommendations
        There may be a limited number of               The United Kingdom should either
        bearer shares in circulation at present        take necessary measures to ensure
        but no instances of bearer shares              that robust mechanisms are in place
        were found in the course of the review.        to identify the owners of bearer shares
        Nevertheless, the mechanisms in                or eliminate such shares.
        place to ensure the availability of infor-
        mation allowing for identification of
        their owners are insufficient.

                                             Phase 2 rating
        To be finalised as soon as a representative subset of Phase 2 reviews is
        completed.


A.2. Accounting records
        Jurisdictions should ensure that reliable accounting records are kept for all
        relevant entities and arrangements.

       General requirements (ToR A.2.1)

       Accounting information
       Companies
       156.    Every UK-incorporated company is obliged to keep accounting records
       under company law (s. 386, Companies Act). The record keeping requirements



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46 – COMPLIANCE WITH THE STANDARDS: AVAILABILITY OF INFORMATION

      do not differ between company types. Accounting records must be sufficient
      to show and explain the company’s transactions; to disclose with reasonable
      accuracy, at any time, the financial position of the company at that time; and
      to enable directors to ensure that any accounts required to be prepared comply
      with the requirements of the Companies Act. Accounts have to 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 liabili-
      ties 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).
      157.    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 sum-
      mary – conviction to imprisonment (twelve months England and Wales, six
      months Scotland and Northern Ireland) or a fine or both.
      158.     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.26 They must also file a copy of the auditor’s 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 compa-
      nies with GBP 110 million (EUR 130 million) and 1 075 public limited com-
      panies with GBP 2.5 million (EUR 2.95 million) for late filing of accounts.27
      159.   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 insur-
      ance company) or if its owners or their owners were all limited companies.
      160.   Entities subject to corporation tax28 need to submit their statutory
      accounts to HMRC as part of their Company Tax Return (CT600). Moreover,

26.   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.
27.   www.companieshouse.gov.uk/about/pdf/companiesRegActivities2009_2010.pdf.
28.   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


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       a company must keep such records as may be needed to enable it to deliver
       a correct and complete return and must include all receipts and expenses in
       the course of the company’s activities and in the case of a trade dealing in
       goods, all sales and purchases (paras. 21 and 22 Schedule 18 to Finance Act
       1998). A company failing to maintain records for tax purposes is liable to
       a penalty not exceeding GBP 3 000 (EUR 3 540) (para. 23 Schedule 18 to
       Finance Act 1998). Companies are also be required to maintain accounting
       records for VAT purposes (Schedule 11 to VAT Act 1994 and Part V VAT
       Regulations 1995).

       Partnerships
       161.     Neither the Partnership Act nor the Limited Partnerships Act has
       specific requirements for general or limited partnerships regarding account-
       ing 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 [part-
       ners 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 account-
       ing records in order to fulfil their fiduciary duty.
       162.    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 com-
       pany 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 pro-
       duced within 9 months of the end of the tax year.


       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 compa-
       nies that are subsidiaries of – or wholly owned by – a charity.


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      163.     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
      partnerships with a total of over GBP 2.5 million (EUR 2.95 million) for late
      filing of accounts.29
      164.     Partnerships as well as foreign entities which are regarded as a part-
      nership 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.
      165.     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 account-
      ing 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 partnership’s 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. This
      issue will be followed up in the UK’s detailed written report to be provided
      to the PRG within one year.

      Trusts
      166.    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

29.   www.companieshouse.gov.uk/about/pdf/companiesRegActivities2009_2010.pdf,
      accessed 2 April 2011.


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       receipt” from beneficiaries when they distribute trust property (Evans v.
       Hickson (1861) 30 Beav 136 and Re Hulkes (1886) 33 Ch D 552).
       167.     UK resident trusts or trusts with UK source income are required to
       maintain accounting records in relation to UK tax matters. They are required
       to keep all such records as may be necessary to deliver a correct and complete
       tax return (s. 12B, TMA). This includes such accounts, statements and docu-
       ments relating to the information in the return that may be required (s. 8(1)(b),
       TMA). Where a trust carries on a trade, profession or business, accounting
       records must include all amounts received and expended and, if dealing in
       goods, all sales and purchases. A trust which does not comply with the above
       requirements is liable to a penalty of GBP 3 000 (EUR 3 540) (s. 12B, TMA).
       A trust governed by UK law which has UK trustees but is neither considered
       resident for tax purposes nor in receipt of UK income will not be subject
       to record keeping or reporting requirements for tax purposes but may be
       required to keep records pursuant to the terms of the trust or, if acting by way
       of business, for AML purposes. In practice, to date there have been no cases
       where information could not be provided because of the failure by UK trus-
       tees to keep accounting records. However, the UK should continue to monitor
       any cases wher the absence of reporting requirements for tax purposes results
       in a failure to provide information for EOI purposes.

       Collective investment schemes
       168.    In addition to accounting requirements under company and trust law,
       open-ended investment companies (OEICs) must keep accounting records
       under ss. 66 and 67 of the OEIC Regulations and authorised unit trusts must
       keep accounting records under the FSA Handbook – Collective Investment
       Schemes 4.5.3. An authorised fund must maintain adequate accounting records
       to enable the authorised fund manager to make annual and half-yearly accounts
       in accordance with the Investment Management Association’s Statement of
       Recommended Practice (IMA SORP) and must ensure that the accounts give
       a true and fair view of the net revenue and the net capital gains and losses
       of the scheme property of the authorised fund (FSA Handbook – Collective
       Investment Schemes 4.5).
       169.    OEICs and AUTs are are treated as companies for income tax pur-
       poses and required to submit Corporate Tax returns. Unauthorised UTs are
       taxed as trusts and required to submit Trustee Tax Returns to HMRC on the
       same basis as trusts. UK (tax) law does not provide for UK unauthorised
       OEICs. Accounting records for all types of CIS are therefore required to be
       kept and must enable a complete and correct tax return to be made for author-
       ised CIS and unauthorised UTs according to their legal form.




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      Charities
      170.    All charities in England and Wales are required to maintain account-
      ing records and prepare annual statements of account (Part VI Charities,
      Act 1993). The trustees must ensure that accounting records are sufficient
      to show and explain all the charity’s 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, with-
      out 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).

      Accounting requirements under AML law
      171.    Regulation 19 of the MLR requires regulated persons to keep a copy
      of, or the references to, the evidence of the customer’s identity obtained
      according to the regulations as well as supporting records in respect of busi-
      ness relationships or occasional transactions which are the subject of CDD
      measures or ongoing monitoring. Records have to be kept for five years.

      Underlying documentation (ToR A.2.2)
      172.     Every company must keep records that are sufficient to show and
      explain the company’s transactions, Accounting records must, in particular,
      contain the matters in respect of which receipt and expenditure have taken
      place (s. 386, Companies Act). In addition, UK tax law requires companies
      to preserve all supporting documents relating to all receipts and expenses in
      the course of the company’s activities, and the matters in respect of which
      the receipts and expenses arise, and in the case of a trade involving dealing
      in goods, all sales and purchases made in the course of the trade. Supporting
      records include, but are not limited to, accounts, books, deeds, contracts,
      vouchers and receipts (s. 21, Schedule 18 to Finance Act 1998).
      173.     UK partnership laws only contain specific requirements regarding
      underlying accounting documentation for qualifying partnerships, which are
      subject to similar requirements as for companies. Nevertheless, 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.) Further, for tax purposes, all kinds of partnerships have to keep sup-
      porting documents relating to all receipts and expenses in the course of the
      trade, profession or business activities, 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


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       (s. 12B(3)(a) and (b), TMA). Supporting documents include, but are not lim-
       ited to, deeds, contracts, vouchers and receipts (s. 12B(6)).
       174.    While UK trust law does not specifically state the underlying docu-
       ments a trusts need to keep, UK tax law requires trusts to keep supporting
       documents relating to all receipts and expenses in the course of trade or busi-
       ness activities, 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 (s. 12B(3)(a) and (b) TMA).
       Supporting documents include, but are not limited to, deeds, contracts, vouchers
       and receipts (12B(6)). Further, trustees must keep records of any discretionary
       income payments made to beneficiaries, as this information is required as part
       of the Trust & Estate income tax return (Question 14). Trusts are required to
       keep and provide if asked to do so all such records as may be required to deliver
       a complete and correct tax return (s12B and s. 8A(1)).

       Five year retention standard (ToR A.2.3)
       175.     UK tax law requires companies to retain accounting records for a
       minimum of six years from the end of the tax year or until any later date
       on which an enquiry into the return is completed (para. 21(2), Schedule 18
       to Finance Act 1998). This requirement takes precedence over company
       law which requires UK companies to retain records for three years (private
       company) and six years (public company) (s. 388, Companies Act). Where
       officers of the company fail to maintain accounting records for the prescribed
       time limit, they are guilty of an offence and liable on conviction on indict-
       ment, to imprisonment for a term of up to two years or/and a fine of up to
       GBP 5 000 (EUR 5 900) summary conviction (s. 389, Companies Act).
       176.    In case of a voluntary liquidation of a company or a partnership, the
       liquidator may one year after the company has been dissolved, dispose of
       the company’s accounting books and records. In a winding up by the court,
       on the authorisation of the official receiver, the liquidator can dispose of
       accounting books and records at any time (s. 16, Insolvency Regulations 1994
       and s. 18, Insolvent Partnerships Order 1994). However, here too, the reten-
       tion period in Paragraph 21 of Schedule 18 to the Finance Act 1998 will take
       precedence over other legislation.
       177.     Neither the 1890 or the 1907 Partnerships Act have specific provi-
       sions regarding retention of accounting records for partnerships. Under
       partnership law, LLPs are required to maintain accounting records for three
       years (s. 6, Limited Liability Partnership (Accounts and Audit) (Application
       of Companies Act) Regulations). For qualifying partnerships the reten-
       tion period is the same as for private companies, i.e. three years (part 2,
       Partnership (Accounts) Regulations 2008). Under tax law, all partnerships are



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      required to maintain records for a minimum of five years. Partnerships are
      required to maintain records until HMRC has completed any enquiries into
      their tax returns (s. 12B, TMA).
      178.     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)).
      179.     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 account-
      ing 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.
      180.   Collective investment schemes are subject to retention require-
      ments 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.
      181.     Companies House is required to maintain information held in the reg-
      ister 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).
      182.    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
      183.     UK company, partnership and trust law together with tax law, pro-
      vide 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



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       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
       the standard of five years is usually overridden by a six year period for tax
       purposes (Finance Act 1998).
       184.    However, under UK partnership and tax law, limited partnerships
       formed under UK law (other than qualifying partnerships) with no UK
       resident partner and no business activity in the UK are not subject to record-
       keeping requirements for tax purposes. Therefore, accounting information in
       line with the standard may not have to be available in the UK for partnerships
       and trusts under these circumstances.
       185.      The tax law’s retention period for a trust’s non-business income and
       capital gains is a minimum of 21 months (s. 12B(2)(b) TMA) following the
       end of the tax year. However, trustees generally retain all relevant documents
       relating to the trust for six years due to the limitation period for breach of
       trust (s. 21(3), Limitation Act 1980).

                  Determination and factors underlying recommendations

                                       Phase 1 determination
        The element is in place.

                                             Phase 2 rating
        To be finalised as soon as a representative subset of Phase 2 reviews is
        completed.


A.3. Banking information

         Banking information should be available for all account-holders.

       Record-keeping requirements (ToR A.3.1)
       186.     Banks and other financial institutions are required to maintain records
       and conduct ongoing monitoring of transactions for anti-money launder-
       ing purposes. Banks and financial institutions must maintain copies of the
       evidence gathered in carrying out customer due diligence and all supporting
       records in respect of a business relationship or occasional transaction which is
       subject to customer due diligence or ongoing monitoring (regulation 19, MLR).
       187.    Banks and financial institutions must establish and maintain appro-
       priate and risk-sensitive policies and procedures relating to customer due
       diligence and ongoing monitoring; reporting and record-keeping, and must



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      establish and maintain systems which enable them to respond fully and rap-
      idly to enquiries from financial investigators (regulations 8 and 20, MLR).
      188.  Several record-keeping requirements for banks are set out in the FSA
      Handbook:
              a financial institution has to establish and maintain systems and con-
              trols 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 Arrange-
              ments, 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 vari-
              ous 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, rel-
              evant 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.
      189.     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.




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       Conclusion
       190.    There are sufficient legal obligations in place for financial institu-
       tions to keep transaction and CDD information available. Though, in con-
       nection with a specific request, one peer mentioned poor record retention by
       a bank. However, this seems to have be an isolated incident.

                  Determination and factors underlying recommendations

                                       Phase 1 determination
        The element is in place.

                                             Phase 2 rating
        To be finalised as soon as a representative subset of Phase 2 reviews is
        completed.




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B. Access to information



Overview

       191.     A variety of information may be needed in a tax enquiry and jurisdic-
       tions should have the authority to obtain all such information. This includes
       information held by banks and other financial institutions as well as informa-
       tion concerning the ownership of companies or the identity of interest holders
       in other persons or entities, such as partnerships and trusts, as well as account-
       ing information in respect of all such entities. This section of the report exam-
       ines whether the UK’s 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.
       192.     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. Non-compliance
       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-consum-
       ing procedure and this has been pointed out by several peers as a considerable
       concern.
       193.     Schedule 36 of Finance Act 2008 provides for comprehensive access
       to ownership, identity, accounting and banking information in specific cases.
       However, the UK cannot currently use its statutory information gathering
       powers for international exchange of information purposes where the name
       of the taxpayer is not known. This results in a limitation to access third party
       information which is 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, can third parties be required via an information notice to



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      provide information if the name of the taxpayer is not known.30 Even though
      the UK Competent Authority will use all information available within HMRC
      to help establish the name of the taxpayer(s), there may be cases, albeit rare,
      where foreseeably relevant information cannot be accessed due to this strict
      requirement. Two of the UK’s peers have mentioned cases where this restriction
      prevented the UK from accessing information requested by the counterparty.
      194.     Further, HMRC has limited search and seizure powers and powers to
      inspect third party premises for EOI purposes and therefore in practice does
      not use them. While this limitation could prevent the UK from providing EOI
      partners with information of sufficient quality, non-compliance with HMRC
      notices to produce documents is sanctionable and none of the UK’s peers
      have noted that it has prevented effective exchange of information.
      195.    Professional privileges in the UK encompass not only communication
      between a client and a lawyer related to legal proceedings or legal advice or
      other admitted legal representative in the course of litigation, for example in
      appeals before Tribunals, but also communication between an auditor or tax
      adviser concerning advice given to his/her client about the client’s tax affairs.
      While in practice these exceptions have not hindered effective international
      exchange of information, the UK should monitor this privilege to ensure it
      does not limit international information exchange in tax matters.

B.1. Competent Authority’s ability to obtain and provide information
 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).


      Ownership, identity and banking information (ToR B.1.1) and
      accounting records (ToR B.1.2)
      196.   HMRC’s 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.

30.   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 provi-
      sion to extend these powers to EOI cases, thus removing the restriction on provid-
      ing 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 rela-
      tion to tax regardless when it became due, whether before, on or after that date.


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       Schedule 36
       197.     Following the merger of the former Inland Revenue and HM Customs
       and Excise in 2005, HMRC’s 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 HMRC’s powers to access information either through issuance of a
       formal information notice or inspection of a business premises. Subject to cer-
       tain 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 person’s posses-
       sion 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 signa-
       tories, 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).

       Information notice in general
       198.    An information notice has to be approved by either the taxpayer or an
       independent tribunal, the First-tier Tribunal (Tax). In both cases such a notice
       requires that the information requested is relevant and reasonably required by
       HMRC in relation to the tax position being checked. The holder of information
       can appeal a taxpayer-approved notice but not a Tribunal-approved notice.
       199.    The extent to which a formal information notice can be issued for
       EOI purposes depends on whether the information is to be collected from
       the taxpayer itself (i.e. the UK information holder and the taxpayer under
       examination by the requesting jurisdiction are the same) or from a third party
       (i.e. where the information holder and the taxpayer under examination are
       not the same). In the former case, paragraph 1 of Schedule 36 provides the
       same powers to check “the taxpayer’s tax position” (emphasis added) for both
       domestic and EOI purposes as the term “tax” includes foreign tax covered
       under an EOI arrangement unless the context otherwise requires (para. 63,
       Schedule 36). In the latter case (third party notice), access powers for EOI
       purposes depend on whether the taxpayer is named or not.

       Third party notice
       200.    According to Paragraph 2 of Schedule 36, a third-party notice can be
       issued in order to check “the tax position of another person whose identity is
       known …” (emphasis added). Here, the definition of the term “tax” includes
       foreign tax covered under an EOI arrangement. Therefore, this provision can
       be applied for EOI purposes. That paragraph goes on to state that “A third party


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      notice must name the taxpayer to whom it relates, unless the First-tier Tribunal
      has approved the giving of the notice and disapplied this requirement under
      paragraph 3.” The interpretation accorded by the UK authorities to paragraph 2
      is that the name of the taxpayer must be known.
      201.     In cases where the name of a taxpayer is not known (including cases
      where there is a class of taxpayers, some of whose individual identities are not
      known), a third party information notice cannot be issued under paragraph 2
      but instead can be issued under paragraph 5 of Schedule 36. However, this
      notice power under paragraph 5 cannot be used for EOI cases as it is spe-
      cifically for “checking the UK tax position” of concerned persons (emphasis
      added). Further, this power is limited to cases where a “serious prejudice to the
      assessment and collection” of tax is suspected.31
      202. Based on the above, HMRC does not currently have the power to
      access information for EOI purposes in cases where the name of the taxpayer
      is not known although the passage of Finance Act 2011 will change this situ-
      ation. The UK authorities have advised that the rationale for this limitation
      was that the test of “foreseeable relevance” (or the equivalent test in previous
      versions of Article 26 of the OECD Model Tax Convention and in EU law
      instruments) could not be met if the taxpayer is not be named by the request-
      ing State. This does not allow effective EOI to the standard. Article 5(5)(a)
      of the OECD Model TIEA and its Commentary does not absolutely require
      the provision of the taxpayer’s name. A request does not constitute a fishing
      expedition because it fails to provide the name or address (or both) of the
      taxpayer under examination. Where the requesting State fails to provide the
      name or address (or both) of the taxpayer, the requesting State would have
      to include other identifying information that is sufficient to demonstrate the
      foreseeable relevance of the request. EOI cases where the taxpayer’s name is
      not known are reportedly rare. However, two of the UK’s peers have com-
      mented on the fact that the UK requires the name of the taxpayer to be estab-
      lished in order to be able to access information and some referred to cases
      where the UK could not provide bank information due to this requirement.
      203.     It has to be noted nevertheless that where an international partner is
      not able to provide the name of the taxpayer, HMRC will, within the ordinary

31.   There is no legal definition of what constitutes a “serious prejudice to the assess-
      ment and collection” of tax. Cases referred to by the UK authorities relate to
      avoidance schemes involving groups of taxpayers with a minimum of GBP 20 mil-
      lion (EUR 23.6 million) of tax at risk. The UK authorities emphasise that it is a
      qualitative, not a quantitative test. The UK authorities have decided to extend their
      legislation and consultations are currently underway to explore how HMRC can
      obtain access to information where the name of the taxpayer is not known even in
      the absence of a serious tax prejudice to the assessment and collection of tax.


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       limits for EOI32, assist in establishing the name of the taxpayer where possible
       based on available data. Case officers would for instance check information
       already held by HMRC, e.g. bank account numbers provide for repayment
       purposes or bulk data on interest payments received from UK banks under
       ss. 17 and 18 of the TMA and the EU Savings Directive in respect of interest
       payments (see below).

       Practical aspects relating to Schedule 36 information notices
       204.     For approximately 56% of requests for information, HMRC can fully
       answer the request using information directly available to the EOI team (includ-
       ing information registered with Companies House). For the remaining 44% of
       requests, a third party enquiry is needed. In these cases, the administration will
       usually first use an informal approach where the information holder provides
       information on a voluntary basis or based on a mandate from or a notice agreed
       on by the taxpayer or another person to which the information directly relates.
       In the relatively small number of cases where this approach is not successful or
       advisable, HMRC seeks notice approval from the Tribunal.
       205.     Due to the common law contractual duty of confidentiality, a bank
       will not be able to provide bank information on a voluntary basis. When
       HMRC receives a request for bank information, it will always check to ensure
       that the requesting authority has tried to obtain the information directly from
       the taxpayer or through a customer mandate to the bank. It will also search
       its current information holdings to see if the request can be answered without
       the need to approach the bank. If information cannot be accessed in this way,
       HMRC will seek to issue a tribunal-approved notice. Based on an agree-
       ment with the British Banking Association (BBA) HMRC will never issue a
       taxpayer-approved notice in a case involving bank information. As Tribunal-
       approved cases are not appealable, the question of appeal by the third party,
       a bank, will therefore not arise in such cases.
       206. For a Tribunal-approved notice, HMRC has to satisfy the tribunal
       that the information is reasonably required to check the tax position it relates
       to and that it is reasonable to expect that the person to whom the notice is
       addressed holds that information. HMRC therefore has to prepare a detailed
       written application for approval. This application sets out the background of
       the requesting country’s investigation, including: identification details of the
       taxpayer; the nature of the tax risk; the reason for and history of the inves-
       tigation; any irregularities established; details of the information required;
       why it is relevant; why the UK resident could be expected to have that infor-
       mation; and confirmation that the requesting country has exhausted its own

32.    Such as the requirement that the applicant jurisdiction has exhausted its domestic
       means first, reciprocity, no fishing expedition, etc.


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      means of obtaining the information. Where appropriate, the application will
      be supported by exhibits of relevant documents. HMRC has to put consider-
      able work into preparing matters for the Tribunal’s consideration. This prepa-
      ration can take several months depending on the complexity of the matter and
      the extent of information provided to HMRC by the requesting jurisdiction.
      207.      According to the UK, if the use of these formal powers is necessary,
      then the shortest possible time it will take to provide a full response to a request
      is 3-4 months. According to one of the UK’s peers this minimum response time
      has not been met in any of the cases where they have requested information.
      Peers also reported up to 18 months response time for bank information and in
      some cases more than two years. The UK acknowledges that for bank informa-
      tion it takes an average of 12 months to respond to a request. The UK advises
      that the steps in Tribunal approved cases and the approximate timeline for each
      step are as follows:
              initial receipt, recording, acknowledgement and review of the request
              – 1 week;
              preparation of application to the First-tier Tribunal for consent to
              issue a formal notice (including a detailed summary of all the rel-
              evant facts and an explanation of why the information is required
              along with supporting exhibits) – 1 month;
              if the requesting country has not provided sufficient information then
              additional details will be requested at this stage in order to finalise
              the application; this will of course increase the overall time taken to
              answer the request;
              issue of informal request to the bank/third party giving a reasonable
              time for the recipient to make written representations, and at the same
              time, issue of a summary of reasons to the taxpayer in the requesting
              country, advising that an application for Tribunal-consent to issue a
              formal notice is being made – at least 1 month for representations to
              be made;
              on receipt of any representations, respond if necessary to the issues
              raised (which may involve seeking further information from the
              requesting country), otherwise finalise the application and request a
              date for a Tribunal hearing – 1 week;
              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



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                 receipt of the information and exchange with the requesting country
                 – 1 week.
       208.    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.
       209.      The UK provides its EOI partners with a checklist regarding informa-
       tion 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”.

       Inspection of business premises
       210.     Schedule 36 also regulates HMRC’s power in specific cases to access
       information through inspection of a taxpayer’s (para. 10) or a third party’s
       (para. 10A) business premises. The power to inspect a taxpayer’s premises is
       applicable if the UK premises is a business premises of the taxpayer under
       investigation by the requesting jurisdiction, e.g. premises of the branch of a
       foreign company under investigation. The power to inspect a third party’s
       premises is very limited, to; (i) the premises of narrowly defined “involved”
       third parties, (ii) “relevant documents” on that premises and (iii) in relation
       to “relevant tax”. Paragraph 61A includes a finite list of 12 specific combina-
       tions of “involved” third party, “relevant documents” and “relevant tax” in
       which third party premises can be inspected. Only four of these 12 combina-
       tions include income tax33 and none seem to be very likely to be relevant in
       international EOI cases.
       211.   Due to the above restrictions, for all practical purposes, HMRC
       cannot inspect business premises of a third party for international EOI
       purposes. However, according to the UK authorities, there has never been
       a case where information could not be provided because of limited scope

33.    One example would be the combination of (i) “A person who is or has been reg-
       istered as a managing agent at Lloyd’s in relation to a syndicate of underwriting
       members of Lloyd’s”, (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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      of the inspection power. While one of the UK’s peers has commented in
      general on limited inspection powers, no indication has been received that it
      has interfered with exchange of information. This may be due to use of the
      compulsory, and sanctionable, power to require that information is provided
      in accordance with a Schedule 36 notice.

      Access to bulk bank information
      212.     In addition to the powers described above, for payments of interest
      HMRC has certain powers to request bulk data. Sections 17 and 18 of the
      TMA allow HMRC to issue a notice requiring any financial institution oper-
      ating in the UK to make a return of interest or equivalent sums paid. Details
      required include the amount of interest and the name and address of the
      payee. Notices are issued annually on a routine basis. Further, the Reporting
      of Savings Income Information Regulations 2003 SI 2003/3297 in relation
      to the UK’s obligations under the EU Savings Directive, requires financial
      institutions to automatically report details of interest and equivalent amounts
      paid to a resident in another Member State of the EU. For non-resident indi-
      viduals in particular jurisdictions, details of the amounts of interest paid on
      UK bank accounts are held by HMRC and are available for exchange with a
      State requesting that information on a reciprocal basis.

      Use of information gathering measures absent domestic tax interest
      (ToR B.1.3)
      213.     As noted previously, the UK can use its powers, including the notice
      powers, to obtain information requested by competent authorities of partner
      jurisdictions. There is one area (see paragraph 201 above) where these powers
      are limited by a domestic tax interest; if the taxpayer’s name is not known,
      the UK cannot use its powers to access information from third parties unless
      it relates to a taxpayer that is currently under examination for UK tax pur-
      poses. While a situation where the taxpayer is not named seldom arises and
      HMRC will use all of its extensive information holdings to assist in finding
      the name of the taxpayer, two of the UK’s peers brought up the taxpayer iden-
      tification requirement as a concern and also referred to cases where informa-
      tion could not be exchanged due to the lack of the name(s) of the taxpayer(s).

      Compulsory powers (ToR B.1.4)
      214.     Schedule 36 notices are compulsory. Where a Schedule 36 informa-
      tion notice is not complied with, HMRC can issue a penalty notice. The initial
      penalty for failing to comply is a fixed fine of GBP 300 (EUR 354). After such
      a penalty is imposed, there is liability to a penalty of up to GBP 60 (EUR 71)
      a day for so long as the failure continues. All penalties may be appealed to the


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       Tribunal. In exceptional cases, where a significant amount of tax is at stake,
       there is provision for the Tribunal to impose a tax-related penalty. A penalty
       would be set aside by HMRC or on appeal by the Tribunal if the UK resident
       had a reasonable excuse for not complying, such as not having access to the
       information required by HMRC (Part 7, Schedule 36).
       215.    Further, a person is guilty of a criminal offence if he/she conceals,
       destroys or otherwise disposes of a document required by a formal notice or
       a document that it has been informed is likely to be the subject of a formal
       notice under Schedule 36. On summary conviction, the maximum fine in
       England, Wales and Northern Island is GBP 5 000 (EUR 5 900) (GBP 10 000
       – EUR 11 800 in Scotland) and on conviction on indictment, the person may
       be subject to imprisonment for up to two years, a fine or both.
       216.      If a financial institution fails to make returns of interest paid under
       sections 17 and 18 of the TMA or under regulations made under section 199
       of the FA 2003, section 98 TMA provides for an initial penalty not exceeding
       GBP 300 (EUR 354). After that penalty is imposed, the financial institution
       is liable to a penalty of up to GBP 60 (EUR 71) a day for so long as the failure
       continues. All penalties may be appealed to a tribunal.
       217.    Compliance with the Schedule 36 notices is high. So far, HMRC has
       not needed to apply the sanctions described above in EOI cases.

       Secrecy provisions (ToR B.1.5)
       218.    There are no secrecy provisions regarding ownership, identity or
       accounting information which limit the competent authority’s ability to respond
       to an EOI request. Access to the full range of information can be gained for the
       purposes of EOI requests, as described above.
       219.     Under UK law, banks owe their customers a contractual duty of
       confidentiality (Tournier v. National Provincial and Union Bank of England).
       This duty extends beyond information relating to the actual state of the
       customer’s account and covers all information acquired by the bank in its
       role as such. The duty of confidentiality therefore applies to all information
       relating to the customer, the customer’s account and his transactions with the
       bank. Certain defined exceptions apply under which the bank is permitted
       to divulge information about a customer’s account. They include situations
       where the bank is compelled to do so by law (e.g. in the case of a Tribunal-
       approved notice under Schedule 36) or the customer agrees to the information
       being disclosed.




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      Professional privilege
      220.     The common law concept of “legal professional privilege”,34 which
      attaches to certain confidential communications between a barrister or solici-
      tor 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 essen-
      tially 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 cre-
      ated primarily for the purpose of ongoing or anticipated litigation.
      221.      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 UK’s 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.
      222. 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,

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).
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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       this provision will protect all information/documents produced when acting
       as an auditor or tax adviser but cannot protect the professional from disclos-
       ing 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
       223. Professional privileges in the UK encompass not only communica-
       tion between an attorney or another person who is acting as a legal repre-
       sentative and their client related to legal proceedings or legal advice, but also
       documents produced by an auditor or a tax adviser for his clients concern-
       ing advice about the client’s 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 excep-
       tions 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.

                  Determination and factors underlying recommendations

                                       Phase 1 determination
        The element is not in place.
                  Factors underlying
                  recommendations                                Recommendations
        The UK cannot currently use its                The UK should ensure that there
        statutory information gathering                is a legal basis to access third
        powers for international exchange              party information for EOI purposes
        of information purposes where the              in line with the standard even
        name of the taxpayer is not known.             in cases where the name of the
                                                       taxpayer cannot be established.




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                                         Phase 2 rating
      To be finalised as soon as a representative subset of Phase 2 reviews is
      completed.
                Factors underlying
                recommendations                               Recommendations
      The formal process to obtain informa-         The entire process for issuance of a
      tion (other than information already in       formal notice to obtain information
      the possession of HMRC or information         should be reviewed with a view to
      which is voluntarily provided to HMRC)        ensuring that it is compatible with
      is complex and on average takes 12            effective international exchange of
      months to complete before information         information in tax matters.
      is provided to the requesting jurisdic-
      tion. This process unduly delays effec-
      tive exchange of information.


B.2. Notification requirements and rights and safeguards
 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.


      Not unduly prevent or delay exchange of information (ToR B.2.1)
      224.    UK law does not in general require the taxpayer to be notified about
      a request or the fact that information exchange takes place. However, in the
      case of a Tribunal-approved third party notice, Schedule 36 requires HMRC
      to:
               name – in the notice – the taxpayer to whom a third party notice relates;
               give a copy of the third party notice to the taxpayer to whom it relates
               (the taxpayer has to be given a summary of the reasons why HMRC
               requires the information); and
               pre-notify the person to whom a notice is addressed about the infor-
               mation or documents that are required and give that person a reason-
               able opportunity to make representations (the Tribunal must be given
               a summary of any representations made by that person).
      225.     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 seri-
               ously prejudice the assessment or collection of tax; or




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                 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.
       226.    Based on the above legislation, HMRC routinely names the taxpayer
       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 pro-
       cedure is consistent with the principle that rights and safeguards should not
       unduly prevent or delay effective exchange of information.
       227.     There is no appeal or other process that a taxpayer can use to prevent
       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).

                  Determination and factors underlying recommendations

                                       Phase 1 determination
        The element is in place.

                                             Phase 2 rating
        To be finalised as soon as a representative subset of Phase 2 reviews is
        completed.




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C. Exchanging information



Overview

       228.    Jurisdictions generally cannot exchange information for tax purposes
       unless they have a legal basis or mechanisms for doing so. A jurisdiction’s
       practical capacity to effectively exchange information relies both on having
       adequate mechanisms in place as well as an adequate institutional frame-
       work. This section of the report assesses the UK’s network of EOI agree-
       ments against the standards and the adequacy of its institutional framework
       to achieve effective exchange of information in practice.
       229.     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 informa-
       tion 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 agree-
       ments meet the international standards. Nevertheless, the UK should continue
       its program 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 (Curaçao and Saint Maarten) with the remain-
       ing 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 Curaçao, Sint Maarten
       and the Caribbean part of the Netherlands (Bonaire, St. Eustatius and Saba) and
       are administered by Curaçao 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 Curaçao 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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     230.     The UK’s EOI agreements cover its major trading partners as well as
     many of the major financial centres and more than 80% of the Global Forum
     members and all EU as well as OECD member jurisdictions. The UK has not
     refused to enter into an exchange of information agreement with any Global
     Forum member seeking to do so. The UK policy is to negotiate a TIEA rather
     than a DTC if it does not see a need to negotiate taxation rights. The UK has
     a full ongoing negotiation program. As agreements meeting the international
     standard are in place with its most important partners, most new agreements
     result from requests received from other jurisdictions seeking an agreement.
     In addition, the UK is currently updating its older agreements by establishing
     Protocols to bring the exchange of information articles to the international
     standard.
     231.    The UK is also able to exchange information with other EU member
     states under the EU Council Directive 77/799/EEC of 19 December 1977
     and will be able to do so under the new EU Council Directive 2011/16/EU of
     15 February 2011which has been in force since 11 March 2011 and has to be
     transposed into national legislation by 1 January 2013. The articles in this new
     Directive are in line with the international standard. The UK automatically
     exchanges information with other EU member states under Council Directive
     2003/48/EC in respect of savings interest and under EU Regulations on
     administrative co-operation in the fields of VAT and excise.
     232.     Further, in 2008, the UK ratified the Council of Europe and OECD
     Convention on Mutual Administrative Assistance in Tax Matters (the COE/
     OECD Convention), which is currently in force with respect to 17 jurisdic-
     tions. The convention provides for all possible forms of administrative
     co-operation between states in the assessment and collection of taxes, in
     particular with a view to combating tax avoidance and evasion. The UK has
     also ratified the protocol to this convention which brought the Convention into
     line with the international standard. The protocol enters into force for the UK
     1 October 2011.
     233.     While the UK’s information exchange agreements generally allow for
     exchange of information to the international standard, shortcomings identi-
     fied in Part B of this report mean that the UK may not be able to comply fully
     with the terms of these agreements in only one limited category of cases.
     234.    The UK has been strongly committed to EOI for many years. Out
     of 27 jurisdictions that provided feedback on their experience exchanging
     information with the UK, 22 jurisdictions provided detailed input. All of
     these jurisdictions expressed that the UK is a very important and over all a
     very good EOI partner. The UK’s competent authority – HMRC’s centre for
     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.



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C.1. Exchange-of-information mechanisms
 Exchange of information mechanisms should allow for effective exchange of information.


       Summary
       235.    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-opera-
                 tion by the EU Member States in the field of value added tax;
                 Regulation (EC) No 2073/2004 concerning administrative co-opera-
                 tion 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.
       236.     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
       problem of overlap is generally addressed within the instruments them-
       selves (see in particular Article 27 of the Council of Europe Convention and
       Article 11 of the 1977 EC Directive “Applicability of wider-ranging provi-
       sions of assistance”). There are no domestic rules in the UK requiring it to
       choose between mechanisms where it has more than one agreement involving
       a particular partner and thus the competent authority is free for any exchange
       to invoke all of the available mechanisms or to choose the most appropriate.



37.    The UK has signed but not yet ratified the amending protocol to the Convention.


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      237.     The UK has a very extensive network of 122 DTCs which provide for
      EOI in tax matters on request. All of these treaties are in force with the exception
      the DTC signed in 2010 with Bahrain and the DTC signed with Ethiopia in 2011.
      There are Protocols to existing treaties not yet in force with Belarus, Belgium,
      Mauritius, Montserrat, Qatar and South Africa. Further, the UK has signed TIEAs
      with 22 jurisdictions (8 of which it also has a DTC with) of which 14 are in force.
      238.      All but one of the signed TIEAs are in line with the 2002 Model Agree-
      ment. Similarly, it is UK policy to include the latest version of Article 26 of the
      OECD Model Tax Convention in all its new DTCs and the UK would normally
      seek to include this in any Protocol to existing DTCs that are being renegoti-
      ated for other reasons. Out of 52 jurisdictions with which the UK has signed
      a new agreement (including protocols) since 2005, only 3 jurisdictions are not
      covered by an agreement that meets the international standard.38 Further, most
      of its older treaties are – subject to reciprocity – to the standard as it is the UK
      policy to interpret DTCs to allow exchange of all types of information even if
      they use language that precedes the language used in Article 26 of the 2005
      Model Tax Convention. A narrower view is taken only in cases where the EOI
      provision clearly uses restrictive wording such as “being information which is
      at their disposal in the normal course of administration” is used.
      239.     With respect to C.1, deficiencies have been identified regarding the
      agreements with the following 18 jurisdictions: Barbados, Egypt, Fiji, Gambia,
      Israel, Jamaica, Kenya, Liechtenstein, Namibia, Nigeria, Oman, Papua New
      Guinea, Sri Lanka, Swaziland, Switzerland, Tunisia, Zambia and Zimbabwe.

      Other forms of exchange of information and co-operation
      240.    The UK exchanges information on both a spontaneous and an auto-
      matic basis. Spontaneous exchanges are encouraged through written guidance
      in HMRC’s “International Manual” and through presentations on exchange of
      information delivered by the EOI team to field officers throughout the UK.
      Field officers are encouraged to send reports of information relating to over-
      seas 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.
      241.     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

38.   Liechtenstein, Oman and Switzerland.


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       Member States and non-EU countries. The total numbers of records exchanged
       per year exceeds 1 million.

       Foreseeably relevant standard (ToR C.1.1)
       242.     The international standard for exchange of information envis-
       ages information exchange upon request to the widest possible extent.
       Nevertheless it does not allow “fishing expeditions,” i.e. speculative requests
       for information that have no apparent nexus to an open inquiry or investiga-
       tion. The balance between these two competing considerations is captured in
       the standard of “foreseeable relevance” which is included in Article 26(1) of
       the OECD Model Taxation Convention.
       243.     The UK has signed TIEAs with 22 jurisdictions and DTCs with 122
       jurisdictions. All but one of the UK’s TIEAs provide for the exchange of infor-
       mation that is “foreseeably relevant” to the administration and enforcement
       of the domestic laws of the parties. One TIEA, with Bermuda, provides for
       the exchange of information that is “relevant” to those laws. Of the DTCs, 25
       provide for the exchange of information when it is “foreseeably relevant” to
       the administration and enforcement of the domestic tax laws of the requesting
       jurisdiction. A further 93 DTCs provide for the exchange of information when it
       is “necessary” for the administration and enforcement of the domestic tax laws
       of the requesting jurisdiction.39 Two DTCs (Qatar and Bahrain) provide for EOI
       as may be “relevant” for carrying out the provisions of the agreement or the
       administration or enforcement of the domestic laws of the Contracting States.
       244. The Switzerland-UK DTC includes provisions requiring the request-
       ing party to provide the name and address of the taxpayer and the name and
       address of the holder of information when making an EOI request. These
       requirements are unduly restrictive and inconsistent with the international
       standard (see Article 5(5) of the OECD Model TIEA and its Commentary).
       However, Switzerland has announced that it is taking steps to bring the agree-
       ment into line with the standard.
       245.      In cases where a request is unclear or incomplete, HMRC reports
       that its competent authority routinely seeks clarifying or additional informa-
       tion from the requesting jurisdiction before declining a request. Most partner
       jurisdictions with an exchange of information relationship with the UK which
       provided peer input confirm this.

39.    The term “necessary” is recognised in the commentary to Article 26 of the
       OECD Model Tax Convention to allow for the same scope of exchange as does
       the term ‘foreseeably relevant’. See Article 1 of the OECD Model TIEA, para. 5.4
       of the Revised Commentary (2008) to Article 26 of the UN Model Convention
       and para. 9 of the Commentary to Article 26 of the OECD Model Convention.


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      In respect of all persons (ToR C.1.2)
      246. For exchange of information to be effective it is necessary that
      the obligation to provide information is not restricted by the residence or
      nationality of the person to whom the information relates or by the resi-
      dence or nationality of the person in possession or control of the information
      requested. For this reason the international standard for exchange of informa-
      tion envisages that EOI mechanisms will provide for exchange of information
      in respect of all persons.
      247.     Forty-five of the UK’s DTCs specifically provide for exchange of
      information with respect to all persons. This includes, with the exception of
      the DTC with Oman, all 37 DTCs (re-)negotiated after 1999. None of these
      agreements restrict the applicability of the exchange of information provision
      to certain persons, for example those considered resident in one of the States.
      The 78 remaining DTCs limit the application of the treaty to residents of the
      contracting parties. However, 15 out of these 78 jurisdictions are covered
      under the Council Directive 77/799/EEC40, eight are covered by a TIEA41
      and three other jurisdictions are covered by the COE/OECD Convention42.
      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.


40.   Portugal, Finland, Denmark, Spain, Italy, Sweden, Ireland, Malta, Czech Republic,
      Slovak Republic, Bulgaria, Cyprus, Hungary, Romania and Greece.
      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 represent-
      ing 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.
41.   Antigua and Barbuda, Belize, British Virgin Islands, Grenada, Guernsey, Isle of
      Man, Jersey, and Saint Kitts and Nevis,.
42.   Azerbaijan, Iceland and the Ukraine.


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       248.     The DTCs with four out of the 52 above mentioned jurisdictions spe-
       cifically 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 estab-
       lished 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
       249.     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.

       Obligation to exchange all types of information (ToR C.1.3)
       250.     All of the UK’s 22 TIEAs allow the exchange of all types of informa-
       tion, including bank information.
       251.     Of the UK’s 122 DTCs (including newly signed protocols), 28 include
       the wording of Article 26(5) of the OECD Model Tax Convention.44 This par-
       agraph states that a contracting state may not decline to supply information
       solely because the information is held by a bank, other financial institution,
       nominee or person acting in an agency or a fiduciary capacity or because it
       relates to ownership interests in a person. However, the 94 remaining DTCs
       do not contain such a provision. They can be divided into four groups:
                 eight of these DTCs are backed up by a TIEA to the standard;45
                 one DTC (with Oman) was re-negotiated post-2005 but does not spe-
                 cifically provide for exchange of bank information and is therefore
                 not to the standard when it comes to exchange of bank information;



43.    Global Forum Peer Review Phase 1 Report – Jamaica, section 29.
44.    Though in the case of Saudi Arabia, exchange of information held by financial
       institutions or persons action in a fiduciary capacity, etc. is covered in the protocol,
       subject to reciprocity.
45.    Antigua and Barbuda, Belize, British Virgin Islands, Grenada, Guernsey, Isle of
       Man, Jersey and Saint Kitts and Nevis.


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              15 older DTCs include language, noting that EOI is restricted to
              “information which is at [a party’s] disposal in the normal course of
              administration” or similar. Agreements with this restrictive language
              are interpreted by the UK authorities as not allowing HMRC to use
              its access powers to obtain any kind of information for EOI purposes.
              Thus, the UK does not have agreements in place to the standard with
              these 15 jurisdictions;46
              the limiting wording mentioned above is also used in the two DTCs;
              with Finland and Greece. As both countries are EU Members, subject
              to the Council Directive 77/799/EEC, which allows for exchange of
              information in line with the standard, the limited wording in these
              two DTCs is not a concern in practice; and
              the DTCs with the 68 remaining jurisdictions,47 12 of which have
              already been peer reviewed by the Global Forum,48 allow the UK,
              according to its interpretation, to exchange bank information
              even though they use language that precedes the language used in
              Article 26 of the 2005 Model Tax Convention, as the UK always
              interpreted Article 26 to allow the exchange of bank information, 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 juris-
              dictions where the EOI provision limits exchange of information to
              “information available under their respective taxation laws”.49
      252.  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

46.   Barbados, Egypt, Fiji, Gambia, Israel, Jamaica, Kenya, Namibia, Nigeria, Papua
      New Guinea, Sri Lanka, Swaziland, Tunisia, Zambia and Zimbabwe.
47.   Argentina, Australia, Azerbaijan, Bangladesh, Belarus, Bolivia, Bosnia and
      Herzegovina, Brunei Darussalam, Bulgaria, Canada, Chile, China, Chinese
      Taipei, Côte D’Ivoire, 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.
48.   Australia, Canada, Denmark, Estonia, Ghana, Hungary, India, Ireland, Italy,
      Norway, Philippines and the United States.
49.   Brunei, Kiribati, Tuvalu, Montserrat, Sierra Leone and Solomon Island.


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       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 program 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.

       Absence of domestic tax interest (ToR C.1.4)
       253.    Thirty-one50 of the UK’s 122 DTCs specifically include, in accord-
       ance with Article 26(4) of the OECD Model Tax Convention, the obligation
       to exchange information regardless of whether the requested jurisdiction
       needs the information for its own purposes. The UK’s 91 remaining DTCs do
       not contain such a provision. However, the UK has signed the protocol to the
       COE/OECD Convention which has language corresponding to Article 26(4)
       of the OECD Model Tax Convention. This provides a specific provision
       for exchange of information in the absence of a domestic tax interest with
       twelve51 of the 91 jurisdictions. Also, with a further 22 jurisdictions, the UK
       has entered into a TIEA which has a provision corresponding to Article 5(2)
       of the 2002 Model TIEA. Finally, none of the remaining DTCs include a pro-
       vision specifically requiring a domestic tax interest.
       254.     With the exception of a previously (see third bullet point in para-
       graph 251 under C.1.3) mentioned group of older agreements with limiting
       language with 15 jurisdictions, the UK is able to exchange information,
       including in cases where the information is not publicly available or where
       it is not already in the possession of government authorities. However, as
       mentioned in Part B.1 of this report, if the name of the taxpayer is not known,
       HMRC has formal powers to access third party information only for the
       purpose to check a taxpayer’s position regarding UK tax. Two of the UK’s
       peers have noted that the power to obtain information when the name of the

50.    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.
51.    Denmark, Finland, Georgia, Iceland, Ireland, Italy, Korea (South), Norway, Portugal,
       Spain, Sweden and Ukraine.


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     taxpayer is not known has been a concern. This limitation has the potential to
     impact on exchanges of information even with the 65 (31 + 12 + 22) jurisdic-
     tions with which the UK has agreements which do contain wording akin to
     Article 26(4) of the OECD Model Tax Convention.
     255.     A domestic tax interest requirement may exist in some of UK’s
     partners’ domestic laws. In such cases, the absence of a provision requiring
     exchange of information unlimited by domestic tax interest will serve as a
     limitation on the exchange of information which can occur under the relevant
     agreement. In practice, the UK has experienced no difficulties arising from
     domestic tax interest provisions in its partner jurisdictions. No requests for
     information have been declined on this basis.

     Absence of dual criminality principles (ToR C.1.5)
     256.     The principle of dual criminality provides that assistance can only be
     provided if the conduct being investigated (and giving rise to an information
     request) would constitute a crime under the laws of the requested country if
     it had occurred in the requested country. In order to be effective, exchange of
     information should not be constrained by the application of the dual criminal-
     ity principle.
     257.     There are no such limiting dual criminality provisions in any of UK’s
     bilateral or in its multilateral agreements.

     Exchange of information in both civil and criminal tax matters
     (ToR C.1.6)
     258.     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 infor-
     mation requested for tax administration purposes (also referred to as “civil
     tax matters”). The UK provides assistance at the administrative level when
     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.
     259.    All of the UK’s EOI agreements provide for exchange of informa-
     tion in both civil and criminal tax matters. However, UK’s 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 program by Liechtenstein and a five year special disclo-
     sure facility by the United Kingdom. Article 6(e) of the TIEA states that a
     requested State may decline a request if:




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                 the request is made on or before 31 March 2015 and does not
                 relate to a criminal tax matter in respect of which the request-
                 ing 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 infor-
                 mation relating to a person who has applied to disclose under a
                 tax disclosure facility of the requesting party.
       260.        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 authori-
       ties 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.

       Provide information in specific form requested (ToR C.1.7)
       261.     There are no restrictions in the exchange of information provisions in
       the UK’s agreements that would prevent the UK from providing information
       in a specific form, as long as this is consistent with its own administrative
       practices. Indeed, some of the UK’s agreements include specific clauses to
       reinforce the need to provide information in the form requested. In addition,
       Article 20 of the COE/OECD Convention specifically notes in its protocol
       that “if, with respect to a request for information, the applicant state has
       specified the form in which it wishes the information to be supplied and the
       requested state is in a position to do so, the requested state shall supply it in
       the form requested.”
       262.     The UK competent authority is prepared to provide information in
       the specific form requested to the extent permitted under UK law and admin-
       istrative practice. In their input, several peers pointed out specifically that the
       UK provided information in the form requested.

       In force (ToR C.1.8)
       263.    The UK has an extensive network of 144 bilateral agreements with
       136 jurisdictions that provide for exchange of information in tax matters,
       comprising 122 DTCs and 22 TIEAs. Of the TIEAs, eight are not yet in force.




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      Ratification is at various stages within these jurisdictions.52 In addition, three
      of the 122 DTCs53 are not yet in force as well as protocols including changes
      to the EOI provision with four other jurisdictions.54 The UK has finalised the
      necessary steps for ratification of two of the agreements not yet in force. With
      one exception,55 these treaties were all signed in 2009 or later.
      264. In addition the UK can exchange information as mentioned with EU
      jurisdictions under the Council Directive 77/799/EEC and some other juris-
      dictions under the COE/OECD Convention.
      265.     According to the UK authorities, ratification procedures typically
      take up to 12 months: After an agreement is signed a draft order in coun-
      cil is prepared (up to four or five months). The draft order is reviewed by
      Parliament (up to six months). Subsequently an Order in Council (s. 173,
      Finance Act 2006) concludes the ratification procedures (one to two months).
      266.     For the large majority of agreements, ratification by the UK has
      occurred within a year of signing. Indeed, the majority of treaties signed
      by the UK have entered into force on average within one year after signing.
      The UK’s 14 signed agreements (including protocols) not yet in force were,
      with one exception, signed in 2009 or later. The UK authorities report that
      ratification of these agreements is taking longer as a result of the significant
      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.
      267.    Information on the UK’s 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 usu-
      ally made public. However, the UK states that a full programme of tax treaty
      negotiations is ongoing.


52.   None of these TIEAs requires an exchange of instruments of ratification by the
      parties before the TIEA can enter into force. But the UK will normally expect a
      formal notification by diplomatic note of the completion of its procedures to give
      effect to the agreement. Insofar as HMRC is aware, this is the situation as per
      31 May 2011: Belize and San Marino have informed the UK that domestic proce-
      dures have been completed. Neither Aruba, Dominica, Grenada, Liberia nor Sint
      Maarten, Curaçao and the Netherlands on behalf of Bonaire, Sint Eustatius and
      Saba have so far announced the completion of necessary procedures. On the UK
      side, the Order in Council is expected to be made later this year.
53.   Bahrain, Belarus and Ethiopia.
54.   Belgium, Mauritius, Montserrat and South Africa.
55.   DTC with Belarus of 7 March 1995.


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       In effect (ToR C.1.9)
       268.   For information exchange to be effective, the parties to an EOI arrange-
       ment need to enact any legislation necessary to comply with the terms of the
       arrangement.
       269.   The UK’s DTCs and TIEAs are given the force of domestic law by
       means of an Order in Council (secondary legislation) to which the arrange-
       ments are scheduled.
       270.     The shortcomings identified in Part B of this report mean that the UK
       is not able to fully comply with the terms of its EOI arrangements in a small
       number of cases. It is recommended that the UK amends its domestic legisla-
       tion so that it can obtain and exchange information in all cases.

       Conclusion
       271.     The UK has one of the world’s largest treaty networks and EOI pro-
       grammes encompassing around 80% of Global Forum members. However,
       due to shortcomings identified in Part B of this report, the UK is not able to
       comply fully with the standard in all cases, notwithstanding its practice of
       assisting requesting jurisdictions to establish the name of the taxpayer based
       on data available to HMRC.

                  Determination and factors underlying recommendations

                                       Phase 1 determination
        The element is in place, but certain aspects of the legal implementation
        of this element require improvement.
                  Factors underlying
                  recommendations                                Recommendations
        The United Kingdom has a very exten-           It is recommended that the UK enact
        sive network of EOI agreements. The            necessary legislation which will
        legal framework in the UK does not             enable it to comply with and give full
        however allow the terms of its agree-          effect to its EOI agreements.
        ments to be given full effect due to
        limitations in the UK’s domestic laws
        which affect only one limited category
        of cases.
                                                       It is recommended that the UK contin-
                                                       ues its program of renegotiating the last
                                                       of its older treaties which are not yet to
                                                       the standard.




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                                       Phase 2 rating
      To be finalised as soon as a representative subset of Phase 2 reviews is
      completed.


C.2. Exchange-of-information mechanisms with all relevant partners
      The jurisdictions’ network of information exchange mechanisms should cover
      all relevant partners.

     272.     The UK’s network of 144 signed bilateral agreements and two multi-
     lateral 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.
     273.     The UK has never declined to establish an EOI agreement with a
     jurisdiction seeking the same. The UK’s 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.
     274.     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 revis-
     ing 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 juris-
     dictions seeking an agreement with the UK.
     275.     The UK’s 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 fac-
     tors 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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                  Determination and factors underlying recommendations

                                       Phase 1 determination
        The element is in place.
                  Factors underlying
                  recommendations                                Recommendations
                                                       The UK should continue to develop its
                                                       EOI network to the standard with all
                                                       relevant partners.

                                             Phase 2 rating
        To be finalised as soon as a representative subset of Phase 2 reviews is
        completed.


C.3. Confidentiality
         The jurisdictions’ mechanisms for exchange of information should have adequate
         provisions to ensure the confidentiality of information received.

       Information received: disclosure, use, and safeguards (ToR C.3.1)
       276.     Governments would not engage in information exchange without the
       assurance that the information provided would only be used for the purposes
       permitted under the exchange mechanism and that its confidentiality would
       be preserved. Information exchange instruments must therefore contain con-
       fidentiality provisions that spell out specifically to whom the information can
       be disclosed and the purposes for which the information can be used. In addi-
       tion to the protections afforded by the confidentiality provisions of informa-
       tion exchange instruments, countries generally impose strict confidentiality
       requirements on information collected for tax purposes.
       277.    All of the EOI articles in the UK’s DTCs include provisions ensuring
       confidentiality of information received. The UK’s TIEAs have confidential-
       ity provisions modelled on Article 8 of the OECD Model TIEA. Both the
       Council Directive 77/799/EEC and the EU/OECD Convention also contain
       safeguards corresponding to those in Article 26(2) of the OECD Model
       Tax Convention, restricting the disclosure of information by the competent
       authority of the receiving state.
       278.     Information received is also confidential according to the UK domes-
       tic law. The Commissioners for Revenue and Customs Act 2005 provides that
       information obtained or held by HM Revenue and Customs (HMRC) may not
       be disclosed. However, a number of exceptions apply (s. 18(2)(a) to (h) and
       s. 18(3)). The key exceptions are:


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             disclosure is necessary for the functions of HMRC;
             disclosure is permitted by another enactment including EOI arrange-
             ments;
             disclosure is with the consent of the person whose information is
             being disclosed;
             disclosure is in the public interest, as set out in certain tightly defined
             criteria at section 20; and
             disclosure is made for the purposes of HMRC criminal prosecutions
             undertaken by the relevant prosecution bodies as set out at section 21
             of the Act.
     279.    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 typi-
     cally more restrictive and HMRC applies these more restrictive provisions.
     HMRC staff, or persons acting on their behalf, breaching the disclosure pro-
     visions 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).
     280.    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.
     281.     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
     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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       All other information exchanged (ToR C.3.2)
       282.   The confidentiality provisions in the agreements and in the UK’s
       domestic law do not draw a distinction between information received in
       response to requests or information forming part of the requests themselves.
       As such, these provisions apply equally to all requests for such information.

                  Determination and factors underlying recommendations

                                       Phase 1 determination
        The element is in place.

                                             Phase 2 rating
        To be finalised as soon as a representative subset of Phase 2 reviews is
        completed.


C.4. Rights and safeguards of taxpayers and third parties
         The exchange of information mechanisms should respect the rights and
         safeguards of taxpayers and third parties.

       Exceptions to requirement to provide information (ToR C.4.1)
       283.     All of the UK’s EOI agreements ensure that the parties are not obliged
       to provide information which would disclose any trade, business, industrial
       or commercial secret. Further, most of the treaties ensure that the parties are
       not obliged to provide information which would disclose professional secrets.
       However, the exception for professional secrets is not explicitly mentioned
       in the UK’s treaties with Antigua and Barbuda, Bolivia, Brunei, Kiribati,
       Montserrat, Sierra Leone and Tuvalu. The UK should continue to ensure that
       appropriate safeguards are maintained in exchanges of information with these
       jurisdictions.
       284.     The TIEA with the British Virgin Islands does not only allow for
       declining a request for information where the information would be used to
       administer or enforce a provision of the tax law which discriminates against a
       citizen of the requested party, but also where a provision would discriminate
       against a resident of the requested party (Art. 7 para. 6). For international tax
       purposes, tax rules that differ only on the basis of residency are universally
       accepted (see for example Article 24(1) of the OECD Model Tax Convention
       and its Commentary, and the Commentary on Article 7(6) of the OECD Model
       TIEA). The rule introduced in the British Virgin Islands TIEA could therefore
       impede the effective exchange of information in certain cases and it is recom-
       mended that the UK works with the British Virgin Islands to resolve this issue.



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     285.     Attorney-client privilege is covered under the limb of “professional
     secrets” in the UK’s DTCs. Considering the provisions of paragraph 2 of
     Article 3 of the respective tax treaties, for application of the tax treaties by the
     UK, this term will derive its meaning that it has under the domestic laws of
     the UK. It is likely therefore that the privileges afforded to information held
     by auditors and tax advisors also fall under this banner. As noted previously in
     Section B.1 of the report, professional privileges in the UK encompasses com-
     munication between an auditor or tax adviser concerning advice given to his/
     her client about the client’s tax affairs. This is beyond the exemption for attor-
     ney-client privilege under the international standards. However, the privilege
     does not cover working papers or documents executed in the course of a trans-
     action 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. Neither have any peers indicated they have experienced
     difficulty getting requested information due to professional privilege. The UK
     should monitor this relatively broad scope of professional privilege to ensure it
     does not prevent access to information held by auditors and tax advisers when
     information is needed to assist the UK’s international partners.

               Determination and factors underlying recommendations

                                   Phase 1 determination
      The element is in place.

                                        Phase 2 rating
      To be finalised as soon as a representative subset of Phase 2 reviews is
      completed.


C.5. Timeliness of responses to requests for information
       The jurisdiction should provide information under its network of agreements
       in a timely manner.

     Responses within 90 days (ToR C.5.1)
     286.     In order for EOI to be effective, it needs to be provided in a time-
     frame which allows tax authorities to apply the information to the relevant
     cases. If a response is provided but only after a significant lapse of time the
     information may no longer be of use to the requesting authorities. This is
     particularly important in the context of international cooperation as cases in
     this area must be of sufficient importance to warrant making a request.



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       287.     None of the UK’s DTCs require the provision of request confirma-
       tions, status updates or the provision of the requested information, within the
       timeframes foreshadowed in Article 5(6) of the OECD Model TIEA. However
       16 out of the 22 TIEAs do so. The remaining 6 TIEAs instead provide that the
       requested Party shall use its best endeavours to forward the requested infor-
       mation to the requesting Party with the “least possible” or least “reasonable
       delay”.56

       Statistics
       288.     The UK competent authority received approximately 1 200 requests
       a year over the last three years. According to the UK’s 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 UK’s own figures for
       the period 2007-2009 show that HMRC provided final responses to informa-
       tion 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 request-
       ing 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.
       289.      The UK does not have statistics on the number of requests that have
       been declined, but to their knowledge, the numbers are small. They include
       cases where the information requested is outside UK jurisdiction, and there-
       fore it is simply not possible for HMRC to provide it. In other situations, the
       EOI team would seek clarification or further background information if the
       purpose or scope of a request was unclear, rather than decline a request out-
       right. Further, there are no statistics available on the numbers of cases where
       further enquiries have been made by EOI partners because of a perceived
       incomplete or inadequate response, but such instances too are considered to
       be rare. The most common reason for being unable to provide information is
       that the information is not held within UK jurisdiction. The most common
       reasons for needing additional information or clarification include:

56.    Bahamas, Gibraltar, Guernsey, Isle of Man, Jersey and Liechtenstein.


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             in cases where a notice has to be approved by the Tribunal and insuf-
             ficient background information has been provided;
             unclear requests because of translation or legibility problems; or
             no obvious nexus or explanation of how the information requested is
             foreseeably relevant.

     Causes for delay
     290.    Delays seemed to be caused mainly by the following factors:
             particularly complicated facts and circumstances related to the
             request;
             access to information may require Tribunal approval, see procedure
             described previously under B.1 (although, only 70 such applications
             were made since 2007);
             the need to translate incoming requests; or
             miscommunication with other jurisdiction, e.g. language difficulties
             or getting contact with requesting jurisdiction’s competent authorities.

     Updates in delayed cases
     291.     Caseworkers in the EOI team are encouraged as a matter of good
     practice to make early interim reports and to provide updates on the status
     of a request where a substantive report cannot be made promptly. A new
     EOI database, which is about to be implemented, will allow the manager to
     monitor performance regarding the provision of status updates. This is not
     the case with the present system. Also, for the years under review, the UK
     did not have a target of providing information or a status update within 90
     days; therefore the UK does not have statistics on the number of cases where
     they have provided a 90-day status update. As a consequence of the introduc-
     tion 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.
     292.    The UK should make sure that in all cases updates are provided
     within 90 days.




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                                    COMPLIANCE WITH THE STANDARDS: EXCHANGING INFORMATION – 91



       Organisational process and resources (ToR C.5.2)

       Competent authority for exchange of information
       293.     The competent authority57 for the United Kingdom are “the Commis-
       sioners for Her Majesty’s Revenue and Customs (HMRC) or their authorised
       representative”. In practice, the Commissioners delegate their competent
       authority responsibilities to a (relatively) small number of named officers of
       HMRC. References in this report to the “UK competent authority” mean offic-
       ers of HMRC with delegated competent authority status, and usually those
       located within the Centre for Exchange of Intelligence.
       294.     All direct tax exchanges of information as well as indirect tax
       exchanges with countries other than EU Member States is in principle dealt
       with by an EOI Team within the Centre for Exchange of Intelligence (CEI) in
       HMRC’s Risk and Intelligence Service in London.58 The EOI team comprises
       11 staff working full time on exchange of information, including two with
       delegated competent authority status, working to an Assistant Director who
       also has competent authority status. The CEI deals with requests for informa-
       tion in both civil and criminal cases under DTCs and TIEAs. All the staff in
       the Exchange of Information team have up to several years of experience with
       EOI and receive training on EOI mechanisms, confidentiality obligations and
       internal processes. This is delivered through desk training, written and oral
       guidance and mentoring. There is no formal training course. All but one of the
       team has worked in exchange of information for over three years. The six most
       senior officers are trained tax inspectors with extensive experience. Quality of
       work is monitored by the two delegated competent authorities in the team, who
       review and sign all international correspondence. In addition, there are quality
       monitoring reviews of cases that took more than six months to close.
       295.    Approximately 10% of EOI requests are referred to and handled by
       specialised teams within HMRC, such as the transfer pricing team or UK
       members of the Joint International Tax Shelter Information Centre (JITSIC).
       Both of these teams have been delegated competent authority status and
       handle international matters without reference to the CEI. For all other
       requests, including the use of formal information-gathering powers, all the

57.    The term “competent authority” means the person or government authority des-
       ignated by a jurisdiction as being competent to exchange information pursuant
       to a double tax convention or tax information exchange.
58.    Exchange of information with EU Member States under the EC Regulation 1798/03
       (VAT administrative co-operation) is dealt with by the UK VAT Central Liaison
       Office. Exchange of information with other EU Member States under the EC
       Regulation 2073/04 (administrative co-operation in excise) is made by the UK Excise
       Central Liaison Office (CLO), or by any Liaison Department or Competent Officials.


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     work needed to answer a request is, as far as possible, carried out by the
     CEI. However, other offices will be involved in various situations, e.g. if the
     UK party is already under investigation by HMRC, the UK party is a large
     company handled by the Large Business Service or there is a requirement for
     technical expertise in a particular subject.
     296.     All requests are reviewed by one of the delegated competent authori-
     ties on receipt, to check that the request is valid. Where translation is needed,
     the request is sent to the translation service, and in most cases a translation is
     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.
     297.    In most cases where information is already in the hands of HMRC
     (including Companies House information accessible on-line), it will be avail-
     able 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 infor-
     mation. 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.

     Absence of restrictive conditions on exchange of information
     (ToR C.5.3)
     298.     There are no laws or regulatory practices in the UK that impose addi-
     tional restrictive conditions on exchange of information.

               Determination and factors underlying recommendations

                                  Phase 1 determination
      The assessment team is not in a position to evaluate whether this element
      is in place, as it involves issues of practice that are dealt with in the
      Phase 2 review.




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                                             Phase 2 rating
        To be finalised as soon as a representative subset of Phase 2 reviews is
        completed.
                  Factors underlying
                  recommendations                                Recommendations
        Data from peers shows that the UK              The UK should ensure that it has the
        does not routinely provide requesting          necessary processes in place to be
        parties with status updates when               able to provide status updates within
        requested information is not provided          90 days.
        within 90 days of receipt of the
        request.




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                    SUMMARY OF DETERMINATIONS AND FACTORS UNDERLYING RECOMMENDATIONS – 95




                 Summary of Determinations
          and Factors Underlying Recommendations 59


                                       Factors underlying
       Determination                   recommendations                       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:          There may be a limited                The United Kingdom should
 In place, but certain           number of bearer shares in            either take necessary
 aspects of the legal            circulation at present but no         measures to ensure that
 implementation of               instances of bearer shares            robust mechanisms are in
 the element need                were found in the course of           place to identify the owners
 improvement.                    the review. Nevertheless, the         of bearer shares or eliminate
                                 mechanisms in place to ensure         such shares.
                                 the availability of information
                                 allowing for identification of
                                 their owners are insufficient.
 Phase 2 rating: To be
 finalised as soon as a
 representative subset
 of Phase 2 reviews is
 completed.
 Jurisdictions should ensure that reliable accounting records are kept for all relevant entities
 and arrangements. (ToR A.2)
 Phase 1 determination:
 In place.
 Phase 2 rating: To be
 finalised as soon as a
 representative subset
 of Phase 2 reviews is
 completed.


59.    The ratings will be finalised as soon as a representative subset of Phase 2 reviews
       is completed.


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96 – SUMMARY OF DETERMINATIONS AND FACTORS UNDERLYING RECOMMENDATIONS

                                   Factors underlying
     Determination                 recommendations                       Recommendations
Banking information should be available for all account-holders. (ToR A.3)
Phase 1 determination:
In place.
Phase 2 rating: To be
finalised as soon as a
representative subset
of Phase 2 reviews is
completed.
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 UK cannot currently               The UK should ensure that
Not in place.                use its statutory information         there is a legal basis to
                             gathering powers for                  access third party information
                             international exchange of             for EOI purposes in line with
                             information purposes where            the standard even in cases
                             the name of the taxpayer is not       where the name of the tax-
                             known.                                payer cannot be established.
Phase 2 rating: To be        The formal process to obtain          The entire process for
finalised as soon as a       information (other than informa-      issuance of a formal notice
representative subset        tion already in the possession of     to obtain information should
of Phase 2 reviews is        HMRC or information which is          be reviewed with a view to
completed.                   voluntarily provided to HMRC) is      ensuring that it is compatible
                             complex and on average takes          with effective international
                             12 months to complete before          exchange of information in tax
                             information is provided to the        matters.
                             requesting jurisdiction. This
                             process unduly delays effective
                             exchange of information.




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                    SUMMARY OF DETERMINATIONS AND FACTORS UNDERLYING RECOMMENDATIONS – 97



                                       Factors underlying
       Determination                   recommendations                       Recommendations
 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:
 In place.
 Phase 2 rating: To be
 finalised as soon as a
 representative subset
 of Phase 2 reviews is
 completed.
 Exchange of information mechanisms should allow for effective exchange of information.
 (ToR C.1)
 Phase 1 determination:          The United Kingdom has a              It is recommended that
 The element is in               very extensive network of             the UK enact necessary
 place, but certain              EOI agreements. The legal             legislation which will enable
 aspects of the legal            framework in the UK does              it to comply with and give full
 implementation of               not however allow the terms           effect to its EOI agreements.
 this element require            of its agreements to be given
 improvement.                    full effect due to limitations in
                                 the UK’s domestic laws which
                                 affect only one limited category
                                 of cases.
                                                                       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: To be
 finalised as soon as a
 representative subset
 of Phase 2 reviews is
 completed.




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98 – SUMMARY OF DETERMINATIONS AND FACTORS UNDERLYING RECOMMENDATIONS

                                  Factors underlying
     Determination                recommendations                       Recommendations
The jurisdictions’ network of information exchange mechanisms should cover all relevant
partners. (ToR C.2)
Phase 1 determination:                                            The UK should continue to
In place.                                                         develop its EOI network to
                                                                  the standard with all relevant
                                                                  partners.
Phase 2 rating: To be
finalised as soon as a
representative subset
of Phase 2 reviews is
completed.
The jurisdictions’ mechanisms for exchange of information should have adequate provisions
to ensure the confidentiality of information received. (ToR C.3)
Phase 1 determination:
In place.
Phase 2 rating: To be
finalised as soon as a
representative subset
of Phase 2 reviews is
completed.
The exchange of information mechanisms should respect the rights and safeguards of
taxpayers and third parties. (ToR C.4)
Phase 1 determination:
In place.
Phase 2 rating: To be
finalised as soon as a
representative subset
of Phase 2 reviews is
completed.




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                    SUMMARY OF DETERMINATIONS AND FACTORS UNDERLYING RECOMMENDATIONS – 99



                                       Factors underlying
       Determination                   recommendations                       Recommendations
 The jurisdiction should provide information under its network of agreements in a timely manner.
 (ToR C.5)
 The assessment team
 is not in a position to
 evaluate whether this
 element is in place, as
 it involves issues of
 practice that are dealt
 with in the Phase 2
 review.
 Phase 2 rating: To be           Data from peers shows that            The UK should ensure that it
 finalised as soon as a          the UK does not routinely             has the necessary processes
 representative subset           provide requesting parties            in place to be able to provide
 of Phase 2 reviews is           with status updates when              status updates within 90 days.
 completed.                      requested information is not
                                 provided within 90 days of
                                 receipt of the request.




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      Annex 1: Jurisdiction’s Response to the Review Report 60


           The UK would like to express its appreciation for the work done by the
       assessment team in evaluating the UK for this combined review. The UK
       supports the work of the Global Forum on Transparency and Exchange of
       Information and welcomes the progress made to improve international trans-
       parency and effective exchange of information to help combat tax evasion
       and avoidance. The UK will consider the findings of this review and how to
       address the recommendations made in advance of providing our intermediate
       report.
           The UK is committed to effective exchange of information. The UK
       has a long history of exchanging information for tax purposes and has an
       extensive network of agreements for exchange of information to meet these
       aims, one of the largest in the world. We reply to hundreds of requests for
       information every year from our international partners. The UK recognises
       the importance of providing prompt responses to requests for exchange of
       information to be effective. As a consequence of the introduction of the new
       EU Administrative Cooperation Directive, the UK has changed its targets
       for responding to requests to: two months where the information is readily
       available to HMRC; 6 months if information needs to be gathered from third
       parties; and more than 6 months in complex cases. We are also implementing
       changes to our internal procedures to ensure that the UK routinely provides
       90 day status updates.
           The UK accepts that at the time of this report, its information gathering
       powers did not allow it to comply with the international standard in certain,
       rare circumstances where the name of the taxpayer is not available but other
       identifying information can be provided by the requesting jurisdiction.
       However, on 19 July 2011, the Finance Act 2011 received Royal Assent. This
       Act provides powers to access information where the name of the taxpayer is
       not known in EOI cases where there is a serious prejudice to the assessment
       and collection of tax. Importantly, these new powers, once they come into


60.    This Annex presents the jurisdiction’s response to the review report and shall not
       be deemed to represent the Global Forum’s views.


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102 – ANNEXES

     force on 1 April 2012, will apply from then on in relation to tax regardless
     of whether the tax became due before, on or after April 2012. Moreover, the
     Exchequer Secretary to the Treasury announced on the 5 July that the UK
     Government will introduce further legislation in the spring of 2012 to extend
     access to information where the name of the taxpayer is not known, even in
     the absence of a serious prejudice to the assessment and collection of tax,
     thus bringing the UK’s information gathering powers fully into line with
     the international standard. The Government issued the consultation docu-
     ment “Modernising Powers, Deterrents and Safeguards: Bringing HMRC’s
     information powers into line with international standards for tax information
     exchange” on 7 July 2011 to explore how this change could be implemented.
     A copy of the consultation document is available on HMRC’s website: www.
     hmrc.gov.uk.
         Finally, there have been a few developments regarding the UK’s network
     of exchange of information agreements since the draft report was prepared
     by the assessment team.
         The UK has now ratified the Protocol to the joint Council of Europe/
     OECD Multilateral Convention on Mutual Administrative Assistance in Tax
     Matters. We deposited our instrument of approval of the Protocol on 30 June
     2011 and the Protocol will enter into force in respect of the UK on 1 October
     2011. Two new Double Taxation Conventions have also been signed. A new
     DTC with China was signed on 27 June 2011; this will replace an existing
     DTC. A first-time DTC with Armenia was signed on 13 July 2011. Both
     DTCs provide exchange of information to the standard. The UK Parliament
     has now approved all of the TIEAs and DTC protocols that are referred to in
     the report as signed but not yet in force. The UK’s ratification procedures for
     these agreements are now complete in all but 5 cases, with the procedures for
     the remaining 5 expected to be completed by the end of October 2011.




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      Annex 2: List of all Exchange-of-Information Mechanisms
                               in Force


EU regulation and multilateral agreements

       299.      The UK exchanges information under:
                 the new EU Council Directive 2011/16/EU of 15 February 2011 on
                 administrative co-operation in the field of taxation. This Directive
                 is in force since 11 March 2011. It repeals Council Directive 77/799/
                 EEC of 19 December 1977 and provides inter alia for exchange
                 of banking information on request for taxable periods after
                 31 December 2010 (Article 18). All EU members are required to
                 transpose it into national legislation by 1 January 2013. The cur-
                 rent EU members, covered by this Council Directive, are: Austria,
                 Belgium, Bulgaria, Cyprus61, Czech Republic, Denmark, Estonia,
                 Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia,
                 Lithuania, Luxembourg, Malta, Netherlands, Poland, Portugal,
                 Romania, Slovakia, Slovenia, Spain, Sweden, United Kingdom;
                 EU Council Directive 2003/48/EC of 3 June 2003 on taxation of sav-
                 ings income in the form of interest payments. This Directive aims to
                 ensure that savings income in the form of interest payments generated
                 in an EU member state in favour of individuals or residual 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

61.    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 represent-
       ing 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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104 – ANNEXES

                 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

                                              Type of EoI
                  Jurisdiction               arrangement           Date signed         Date in force
1     Anguilla                                  TIEA                20-07-09             17-02-11
                                                DTC                 19-12-47             19-12-47
2     Antigua and Barbuda                       Protocol            05-03-68            19-09-68
                                                TIEA                18-01-10             19-05-11
3     Argentina                                 DTC                 03-01-96             01-08-97
4     Aruba                                     TIEA                05-11-10
5     Australia                                 DTC                 21-08-03              17-12-03
                                                DTC                 30-04-69                N/K
                                                Protocol            17-11-77                N/K
6     Austria
                                                Protocol            18-05-93                N/K
                                                Protocol            11-09-09              19-11-10
7     Azerbaijan                                DTC                 23-02-94              03-10-95
8     Bahamas                                   TIEA                29-10-09              07-01-11
9     Bahrain                                   DTC                 10-03-10
10    Bangladesh                                DTC                 08-08-79              08-07-90
                                                DTC                 26-03-70              26-11-70
11    Barbados
                                                Protocol            18-09-73              12-12-73
                                                DTC                 31-07-85              30-01-86
12    Belarus
                                                DTC                 07-03-95
                                                DTC                 01-08-87              04-10-89
13    Belgium
                                                Protocol            24-06-09
                                                DTC                 19-12-47              19-12-47
                                                Protocol            08-04-68              08-03-69
14    Belize
                                                Protocol            12-12-73              12-12-73
                                                TIEA                25-03-10
15    Bermuda                                   TIEA                04-12-07              10-11-08



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                                                                                         ANNEXES – 105



sqdf62qsmklf63                                   Type of EoI
                   Jurisdiction                 arrangement          Date signed        Date in force
 16    Bolivia                                     DTC                03-11-94            23-10-95
 17    Bosnia and Herzegovina                      DTC                06-11-81           18-09-82
 18    Botswana                                    DTC                09-09-05           04-09-06
                                                   DTC                29-10-09            12-04-10
 19    British Virgin Islands
                                                   TIEA               29-10-09            12-04-10
                                                   DTC                08-12-50            08-12-50
 20    Brunei Darussalam                           Protocol           04-03-68              N/K
                                                   Protocol           12-12-73              N/K
 21    Bulgaria                                    DTC                16-09-87            28-12-87
                                                   DTC                08-09-78            18-12-80
 22    Canada
                                                   Protocol           07-05-03           04-05-04
 23    Cayman Islands                              DTC                15-06-09            20-12-10
 24    Chile                                       DTC                12-07-03            21-12-04
 25    China                                       DTC                26-07-84            23-12-84
 26    Côte D’Ivoire                               DTC                26-06-85            24-01-87
 27    Croatia                                     DTC                06-11-81           16-09-82
 28    Chinese Taipei                              DTC                08-04-02            23-12-02
 29    Curaçao62                                   TIEA               10-09-10
                                                   DTC                20-06-74            18-03-75
 30    Cyprus 63
                                                   Protocol           02-04-80            15-12-80
 31    Czech Republic                              DTC                05-11-90            20-12-91
                                                   DTC                11-11-80            17-12-80
 32    Denmark                                     Protocol           01-07-91              N/K
                                                   Protocol           15-10-98              N/K


62.    The count of 22 TIEAs includes Curaçao and St. Maarten but not the Caribbean
       part of the Netherlands which is a part of the Netherlands jurisdiction, see foot-
       note 35.
63.    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 represent-
       ing 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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106 – ANNEXES

                                            Type of EoI
                Jurisdiction               arrangement           Date signed         Date in force
33    Dominica                                TIEA                31-03-10
34    Egypt                                   DTC                 25-04-77              23-08-80
35    Ethiopia                                DTC                 10-06-11
36    Estonia                                 DTC                 12-05-94                N/K
37    Falkland Islands (Malvinas)             DTC                 17-12-97              18-12-97
38    Faroe Islands                           DTC                 20-06-07              03-06-08
39    Fiji                                    DTC                 21-11-75              27-08-78
                                              DTC                 17-07-69              05-02-70
                                              Protocol            17-05-73              07-07-74
                                              Protocol            16-11-79              25-04-81
40    Finland
                                              Protocol            01-10-85                N/K
                                              Protocol            26-09-91                N/K
                                              Protocol            31-07-96                N/K
41    France                                  DTC                 19-08-08              18-12-09
42    FYROM                                   DTC                 08-11-06              02-08-07
43    Gambia                                  DTC                 20-05-80              05-07-82
                                              DTC                 13-07-04              11-10-05
44    Georgia
                                              Protocol            04-02-10              17-12-10
45    Germany                                 DTC                 30-03-10              30-12-10
46    Ghana                                   DTC                 20-01-93              10-08-94
47    Gibraltar                               TIEA                24-08-09              15-12-10
48    Greece                                  DTC                 25-06-53              15-01-54
                                              DTC                 04-03-49              04-03-49
49    Grenada                                 Protocol            25-07-88              14-12-88
                                              TIEA                31-03-10
                                              DTC                 24-06-52              24-06-52
                                              Protocol            14-12-94              03-01-95
50    Guernsey
                                              Protocol            20-01-09              27-11-09
                                              TIEA                20-01-09              27-11-09
51    Guyana                                  DTC                 31-08-92              18-12-92
52    Hong Kong, China                        DTC                 21-06-10              20-12-10
53    Hungary                                 DTC                 28-11-77              27-12-78
54    Iceland                                 DTC                 30-09-91              19-12-91
55    India                                   DTC                 25-01-93              25-10-93
56    Indonesia                               DTC                 05-04-93              14-04-94




                   PEER REVIEW REPORT – COMBINED PHASE 1 AND PHASE 2 REPORT – UNITED KINGDOM © OECD 2011
                                                                                         ANNEXES – 107



                                                 Type of EoI
                   Jurisdiction                 arrangement          Date signed        Date in force
                                                   DTC                02-06-76            23-12-76
 57    Ireland                                     Protocol           07-11-94           21-09-95
                                                   Protocol           04-11-98            23-12-98
                                                   DTC                29-07-55            29-07-55
                                                   Protocol           19-12-91            19-12-91
 58    Isle of Man                                 Protocol           14-12-94              N/K
                                                   Protocol           29-09-08           02-04-09
                                                   TIEA               29-09-08           02-04-09
                                                   DTC                28-09-62              N/K
 59    Israel
                                                   Protocol           20-04-70            25-03-71
 60    Italy                                       DTC                21-10-88            31-12-90
 61    Jamaica                                     DTC                16-06-73            31-12-73
 62    Japan                                       DTC                02-02-06            12-10-06
                                                   DTC                24-06-52           24-06-52
                                                   Protocol           14-12-94              N/K
 63    Jersey
                                                   Protocol           10-03-09            27-11-09
                                                   TIEA               10-03-09            27-11-09
 64    Jordan                                      DTC                22-07-01           24-03-02
                                                   DTC                21-03-94            15-12-96
 65    Kazakhstan
                                                   Protocol           18-09-97            02-11-98
                                                   DTC                31-07-73              N/K
 66    Kenya                                       Protocol/          20-01-76           30-09-77
                                                   EoN
                                                   Protocol            10-05-50           10-05-50
 67    Kiribati                                    Protocol            04-03-68           23-10-68
                                                   DTC                 25-07-74           25-07-74
 68    Korea (South)                               DTC                 25-10-96           30-12-96
 69    Kuwait                                      DTC                 21-07-99           01-07-00
 70    Latvia                                      DTC                 08-05-98           30-12-98
 71    Lesotho                                     DTC                 17-12-97           23-12-97
 72    Liberia                                     TIEA                01-11-10
 73    Libya                                       DTC                 17-11-08           08-03-10
 74    Liechtenstein                               TIEA                11-08-09           02-12-10
                                                   DTC                 19-03-01           28-11-02
 75    Lithuania
                                                   Protocol            21-05-02           28-11-02




PEER REVIEW REPORT – COMBINED PHASE 1 AND PHASE 2 REPORT – UNITED KINGDOM © OECD 2011
108 – ANNEXES

                                               sqdf  64
                                              Type of EoI
                  Jurisdiction               arrangement           Date signed         Date in force
                                                DTC                 24-05-67             12-07-68
                                                Protocol            18-07-78               N/K
76    Luxembourg
                                                Protocol            28-01-83               N/K
                                                Protocol            02-07-09             28-04-10
                                                DTC                 25-11-55             25-11-55
77    Malawi                                    Protocol            12-07-68            13-09-68
                                                Protocol            10-02-78             14-03-79
                                                DTC                 17-12-97             08-07-98
78    Malaysia
                                                Protocol            22-09-09             28-12-10
79    Malta                                     DTC                 12-05-94             27-03-95
                                                DTC                 11-02-81             19-10-81
                                                Protocol            23-10-86               N/K
80    Mauritius
                                                Protocol            27-03-03             22-10-03
                                                Protocol            10-01-11
                                                DTC                 02-06-94              15-12-94
81    Mexico
                                                Protocol            23-04-09              18-01-11
82    Moldova                                   DTC                 08-11-07              30-10-08
83    Mongolia                                  DTC                 23-04-96              04-12-96
84    Montenegro                                DTC                 06-11-81              16-09-82
                                                DTC                 19-12-47              19-12-47
85    Montserrat                                Protocol            06-04-68              04-12-68
                                                Protocol            09-12-09
                                                DTC                 13-03-50              13-03-50
86    Myanmar
                                                Protocol            04-04-51              04-04-51
87    Morocco                                   DTC                 08-09-81              29-11-90
                                                DTC                 28-05-62              19-12-62
88    Namibia
                                                Protocol            14-06-67              27-11-67
                                                DTC                 26-09-08              25-12-10
89    Netherlands
                                                TIEA 64             10-09-10
                                                DTC                 04-08-83              16-03-84
90    New Zealand                               Protocol            04-11-03              23-07-04
                                                Protocol            07-11-07              28-08-08
91    Nigeria                                   DTC                 09-06-87              27-12-87
92    Norway                                    DTC                 12-10-00              21-12-00


64.   See footnote 36 regarding Curaçao, Sint Maarten and the Caribbean part of the
      Netherlands.


                     PEER REVIEW REPORT – COMBINED PHASE 1 AND PHASE 2 REPORT – UNITED KINGDOM © OECD 2011
                                                                                         ANNEXES – 109



                                                  qsdf 65
                                                 Type of EoI
                  Jurisdiction                  arrangement          Date signed        Date in force
                                                   DTC                23-02-98            09-11-98
 93    Oman
                                                   Protocol           26-11-09            09-01-11
 94    Pakistan                                    DTC                24-11-86            08-12-87
 95    Papua New Guinea                            DTC                17-09-91            20-12-91
 96    Philippines                                 DTC                10-06-76            22-01-78
 97    Poland                                      DTC                20-07-06            27-12-06
 98    Portugal                                    DTC                27-03-68            17-01-69
                                                   DTC                25-06-09            15-10-10
 99    Qatar
                                                   Protocol           20-10-10
 100 Romania                                       DTC                18-09-75            21-11-76
 101 Russian Federation                            DTC                15-02-94            18-04-97
                                                   DTC                19-12-47            19-12-47
 102 Saint Kitts and Nevis
                                                   TIEA               18-01-10            19-05-11
 103   Saint Lucia                                 TIEA               18-01-10            19-05-11
 104   Saint Vincent and the Grenadines            TIEA               18-01-10            19-05-11
 105   San Marino                                  TIEA               16-02-10
 106   Saudi Arabia                                DTC and            31-10-07            01-01-09
                                                   Protocol
 107 Serbia                                        DTC                 06-11-61           16-09-82
 108 Sint Maarten 65                               TIEA                10-09-10
                                                   DTC                 19-12-47           19-12-47
 109 Sierra Leone
                                                   Protocol            18-03-68           16-01-69
                                                   DTC                 12-02-97           19-12-97
 110 Singapore
                                                   Protocol            24-08-09           08-01-10
 111   Slovak Republic                             DTC                 05-11-90           20-12-91
 112   Slovenia                                    DTC                 13-11-07           11-09-08
                                                   DTC                 10-05-50           10-05-50
 113   Solomon Islands                             Protocol            08-04-68           24-01-69
                                                   Protocol            25-07-74           25-07-74
                                                   DTC                 04-07-02           17-12-02
 114   South Africa
                                                   Protocol            08-11-10
                                                   DTC                 21-10-75             N/K
 115   Spain
                                                   DTC                 15-03-95             N/K
 116 Sri Lanka                                     DTC                 21-06-79           21-05-80


65.    See footnote 36 regarding Curaçao, Sint Maarten and the Caribbean part of the
       Netherlands.


PEER REVIEW REPORT – COMBINED PHASE 1 AND PHASE 2 REPORT – UNITED KINGDOM © OECD 2011
110 – ANNEXES

                                            Type of EoI
                Jurisdiction               arrangement           Date signed         Date in force
117 Sudan                                     DTC                 08-03-75             08-10-77
118 Swaziland                                 DTC                 26-11-68            18-03-69
119 Sweden                                    DTC                 30-08-83            26-03-84
                                              DTC                 08-12-77               N/K
                                              Protocol            05-03-81            10-05-82
120 Switzerland                               Protocol            17-12-93             19-12-94
                                              Protocol            26-06-07             22-12-08
                                              Protocol            07-09-09             15-12-10
121   Tajikistan                              DTC                 31-07-85            18-04-97
122   Thailand                                DTC                 18-02-81             20-11-81
123   Trinidad and Tobago                     DTC                 31-12-82             22-12-83
124   Tunisia                                 DTC                 15-12-82            20-01-84
125   Turkey                                  DTC                 19-02-86             26-10-88
126   Turkmenistan                            DTC                 31-07-85            30-01-86
127   Turks and Caicos Islands                TIEA                22-07-09             25-01-11
                                              DTC                 10-05-50            10-05-50
128 Tuvalu                                    Protocol            04-03-68             23-10-68
                                              Protocol            25-07-74             25-07-74
129 Uganda                                    DTC                 23-12-92             21-12-93
130 Ukraine                                   DTC                 10-02-93             11-08-93
                                              DTC                 24-07-01             19-07-02
131 United States
                                              Protocol            19-07-02             31-03-03
132 Uzbekistan                                DTC                 15-10-93            10-06-94
133 Venezuela                                 DTC                 11-03-96             31-12-96
134 Vietnam                                   DTC                 09-04-94             15-12-94
                                              DTC                 22-03-72            29-03-73
135 Zambia
                                              Protocol            30-04-81             14-01-83
136 Zimbabwe                                  DTC                 19-10-82             11-02-83




                   PEER REVIEW REPORT – COMBINED PHASE 1 AND PHASE 2 REPORT – UNITED KINGDOM © OECD 2011
                                                                                        ANNEXES – 111




                     Annex 3: List of all Laws, Regulations
                        and Other Relevant Material



       Company law
            Companies Act 2006
            Overseas Companies Regulations 2009
            Companies (Company Records) Regulations 2008
            Insolvency Regulations 1994
            Uncertificated Securities Regulations 2001

       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




PEER REVIEW REPORT – COMBINED PHASE 1 AND PHASE 2 REPORT – UNITED KINGDOM © OECD 2011
112 – ANNEXES

     Trust law
         Convention on the Law Applicable to Trusts and on Their Recognition 1985
         Recognition of Trusts Act 1987
         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 2011
                                                                                        ANNEXES – 113



       AML and financial regulation law
            Money Laundering Regulations 2007
            Financial Services Markets Act 2000
            FSA’s 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 para-
               graph 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)




PEER REVIEW REPORT – COMBINED PHASE 1 AND PHASE 2 REPORT – UNITED KINGDOM © OECD 2011
114 – ANNEXES

     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)
         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 2011
                                                                                        ANNEXES – 115




           Annex 4: People Interviewed during On-Site Visit



       HM Treasury
            Deputy Director, International Tax
            Senior Policy Advisor, International Tax
            Legal Adviser
            Head of Anti-Money Laundering Policy, Counter Illicit Finance

       HM Revenue and Customs – HMRC
            Assistant Director, Centre for Exchange of Intelligence
            Senior Intelligence Manager, Centre for Exchange of Intelligence
            Senior Policy Advisor, Tax Treaty Team
            Powers Team
            SI Governance and Assurance
            CGT Trusts and IHT Policy
            Trusts
            CT and VAT
            PAYE, SA and NICS
            CTSA Technical Advisor, CT and VAT Products and Processes
            Charities, Assets and Residence
            Anti-money laundering team




PEER REVIEW REPORT – COMBINED PHASE 1 AND PHASE 2 REPORT – UNITED KINGDOM © OECD 2011
116 – ANNEXES

     Financial Services Agency – FSA
         Associate, Firm Risk Team, Risk Department
         Manager, Authorisations and Central Reporting Division
         Senior Associate, Enforcement and Financial Crime
         Senior Associate, CIS Policy Advisor, AML

     Companies House
     Director of Corporate Strategy

     Department for Business, Innovation and Skills – BIS
         Assistant Director, Corporate Law and Governance

     Office of the Third Sector (Cabinet Office)
         Policy Manager

     Charity Commission
         Senior Advisor
         Legal Advisor




                 PEER REVIEW REPORT – COMBINED PHASE 1 AND PHASE 2 REPORT – UNITED KINGDOM © OECD 2011
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                          (23 2011 46 1 P) ISBN 978-92-64-11814-0 – No. 58581 2011
Global Forum on Transparency and Exchange of Information
for Tax Purposes
PEER REVIEWS, COMBINED: PHASE 1 + PHASE 2
UNITED KINGDOM
The Global Forum on Transparency and Exchange of Information for Tax Purposes is the
multilateral framework within which work in the area of tax transparency and exchange of
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 Please cite this publication as:
 OECD (2011), Global Forum on Transparency and Exchange of Information for Tax Purposes Peer
 Reviews: United Kingdom 2011: Combined: Phase 1 + Phase 2, Global Forum on Transparency
 and Exchange of Information for Tax Purposes: Peer Reviews, OECD Publishing.
 http://dx.doi.org/10.1787/9789264118164-en
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