IEIM721050 - Knowledge Test

A service provider will not always have full knowledge of the arrangements in respect of which they are providing assistance or advice. A service provider can argue that they are not an intermediary because they could not reasonably have been expected to know that they were involved in a reportable arrangement, and so the obligation to report does not arise in respect of that person

The defence for service providers that they could not reasonably be expected to know that they were part of a reportable arrangement exists because a service provider might only be involved in a particular part of a wider arrangement, such as a bank providing finance. It might, therefore, not have knowledge of the wider arrangements, and crucially whether the arrangement would come under the reporting requirements for being a CRS Arrangement or Opaque Offshore Structure. In such a scenario, it is reasonable that the bank is not expected to make a report, because it did not know, and could not reasonably be expected to know, that it was involved in a reportable arrangement at the time that the arrangement was entered into.

The definition of ‘service provider’ does not include a person who becomes aware of an arrangement but does not provide any assistance or advice. This could be the case if, for example, an auditor, examining a company’s accounting records, identifies a transaction which is reportable. In such a case, the auditor would not be an intermediary simply by virtue of having knowledge of an arrangement, provided that they did not do anything else which would bring them into the intermediary category. This is because the auditor will not have provided “assistance or advice with respect to the design and marketing of a CRS Arrangement or Opaque Offshore Structure”. The auditor will only have become aware of the arrangement after it was implemented so will not have helped in its design. Even if the audit was done in real time, rather than after the arrangement was implemented, this would not necessarily change the analysis. The key test is what activities the person undertakes. However, in a ‘real-time’ scenario, the auditor could more easily cross the boundary into giving assistance or advice in respect of the implementation of the arrangement, in a way that they could not after the fact. A person in this situation should take care to ensure that they meet their obligations if they do end up performing any of those activities.

This analysis is not limited to auditors. Other people could also be aware of an arrangement, and the fact that it is reportable, but not have a reporting obligation themselves, because they do not carry out the activities necessary to qualify as an intermediary. Whether or not the person is actually performing the necessary activities to be an intermediary will depend on the particular circumstances. However, the definition of intermediary is broad to ensure reporting. Therefore, HMRC does not consider it to be a particularly high hurdle for a person to be an intermediary