IEIM721040 - Service Provider

A service provider is an intermediary who provides assistance or advice (directly or by means of other persons) in relation to the designing, marketing, implementing, or organising of a CRS Arrangement or Opaque Offshore Structure. The Model Rules refer to this as a ‘Relevant Service’. Assistance or advice could include providing finance, expertise, or knowledge, sharing experience, or offering accounting advice.

A person will not be a service provider, if they did not know, and could not reasonably be expected to know, that they were providing assistance or advice with respect to the designing and marketing a CRS Arrangement or Opaque Offshore Structure. IEIM721050 and IEIM721060 provide more detail on the application of this test.

A person who provides certain routine services for a client would not normally be caught by the definition of an intermediary. Routine services would not include assistance or advice in the marketing or design of an arrangement.

For example, completing a tax return on behalf of a client who has entered into a reportable arrangement will not in itself make a person an intermediary. The action of reporting on a reportable arrangement does not meet any of the tests outlined in the definition of an intermediary, as although it may involve providing aid in respect of the arrangement, it is not in respect of the marketing or design of the arrangement. Of course, this would not preclude a person from being an intermediary if they have undertaken other activities which bring them within the definition.

Providing an opinion on whether an arrangement is reportable, will also not in itself create a reporting obligation, for the same reason that it will not meet the test in the definition of intermediary. For example, a management company of an investment fund may be uncertain about whether an arrangement it is helping to set up is reportable. It may seek advice from a firm with more expertise in the requirements of these Regulations. If that firm advises that in its view the arrangement should be reported, that does not create an obligation on that firm providing the opinion to make a report, because it is not undertaking any of the activities of an intermediary. If, however, in providing that view, the firm provides advice about the implementation of the arrangement itself, for example about how it could be structured in a more efficient way, then the firm could well become an intermediary in respect of that arrangement.

A service provider also would have to know (or it could be reasonably expected for them to know) that the Arrangement is subject to disclosure under the Model Rules. A person may be sufficiently far-removed from the arrangement that they would not be a service provider. For example, a person may provide assistance in respect of the implementation of an arrangement but may have little knowledge of the detail of what the arrangement actually entails. They may therefore not be able to assess whether the arrangement is reportable or not. A person in this situation would not be a service provider.

For example, a situation where a custodian is involved in making routine payments to non-CRS participating jurisdictions is unlikely to be service provider if it didn’t and couldn’t reasonably be expected to know it was doing so as part of a reportable arrangement. However, if the custodian was aware of the CRS avoidance arrangement and these payments were part of the arrangement then the custodian would be a service provider and have an obligation to report

A person may have marketing discussions with clients. This would be discussions with potential clients of a CRS Avoidance Arrangement or Opaque Offshore Structures to outline the benefits of such arrangements to these potential clients. For the person having marketing discussions to be brought into the definition of a service provider, they would have to be assisting with the marketing of a CRS Avoidance Arrangement or Opaque Offshore Structure. If the result of this assistance in marketing means encouraging others to enter into an arrangement based upon its CRS treatment and the person is reasonably expected to know about the CRS treatment, then they will be a service provider. However, discussions concerning what the rules are would not be sufficient to bring them in scope as a service provider.

Potential intermediaries are not expected to do additional investigations to understand their clients’ motive for using an arrangement. For example, a fund is manged by a UK manager. One of the investors in this fund is a Delaware limited partnership. As the US has not adopted CRS this could potentially be considered a CRS avoidance arrangement if it was designed to circumvent the CRS. In this situation we would not expect the UK manager to investigate the rationale for their investor using a Delaware limited partnership if such an investigation is not covered by the UK manager’s existing due diligence process. The fund manager would not be an intermediary because they did not know, and could not reasonably be expected to have known, that the arrangement was being used to circumvent the CRS. However, if the fund manager was marketing the fund as a way to get around CRS reporting, then they would be brought in scope as an intermediary.

The timing of reporting obligations of service providers is different to those of a promoter. For details of this see IEIM740010. If the promoter has already provided full details of the arrangement, then the service provider does not have to report as well, and vice versa. See IEIM740100.