HMRC have published new guidance about the calculation of penalties for issues with Automatic Exchange of Information (AEOI) compliance. Compliance issues may be determined as the result of compliance checks, either based on returns submitted to HMRC, or through the increasing number of in person reviews which are being conducted by HMRC.
The guidance confirms that HMRC may look to raise penalties both for inaccurate reporting (up to £3,000) and for failure to comply with a requirement of the regulations such as due diligence or notification (£300). However, it also confirms that provided a failure is not deliberate, HMRC will not charge multiple penalties for each reportable person who is incorrectly treated.
This is as expected, and HMRC have confirmed a move to account-by-account penalties following the introduction of regulations implementing the Common Reporting Standard (CRS) from 1 January 2026. However, as other tax authorities are looking to apply account-level penalties based on existing legislation, HMRC’s confirmation will be welcome.
HMRC have increased the level of their reviews in the past 12 months, and a growing number of financial institutions (FIs) have already been contacted. Typically, HMRC request meetings with UK FIs, and then confirm their intention to review documentation for both reportable and non-reportable accounts. HMRC reviews previously focused on governance, due diligence and systems through a questionnaire and walkthrough interviews but they are now adding a review of account holders to be conducted on-site. We have seen this happening even where a FI responded to HMRC’s original questionnaire some time ago.
With UK AEOI reporting due by 31 May 2025, and CRS2 due to commence from 1 January 2026, financial institutions may want to consider whether their current compliance efforts would be satisfactory from HMRC’s perspective and, in particular, whether obligations for accounts opened, changed or reported after 1 January 2026 are robust and can be proven to be correctly documented.
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