In Wilsons Solicitors LLP v HMRC  UKFTT 627 (TC), the FTT has held that the obligation to keep records under the Money Laundering Regulations 2007 (MLR) does not make a law firm a relevant data-holder for the purpose of HMRC’s data-gathering powers.
Schedule 23, Finance Act 2011 (Schedule 23) enables HMRC to require a relevant data holder to provide it with certain information.
Paragraph 17, Schedule 23, provides that relevant data holders include those who maintain a “register” and defines register as including “any record or list that any other person is required or permitted to maintain”.
HMRC’s view was that as solicitors are under a duty to keep records under the MLR, they maintain a register, for the purposes of paragraph 17.
HMRC required certain information from Wilsons Solicitors LLP (Wilsons), which related to its clients who sought advice in relation to offshore structures. HMRC issued a notice to Wilsons under paragraph 1, Schedule 23 (the Notice), requesting details of beneficial owners of offshore companies and persons who had beneficial interests in offshore partnerships.
Wilsons appealed the Notice.
The appeal was allowed.
The issue for the FTT to determine was whether the requirement under the MLR for Wilsons to keep copies of documents in relation to the identity of its clients and evidencing the purpose and nature of the business relationship meant that Wilsons was a relevant data holder for the purposes of Schedule 23.
The appeal turned on whether Wilsons was a person by whom a “register” was maintained.
The FTT disagreed with HMRC’s submission that the singular term “register” equates to the plural term “records”. A person who keeps records is not a relevant data-holder unless each record is an individual register. In the view of the FTT, records kept in accordance with the MLR were not individual registers because they were not “maintained”, which the FTT considered meant kept up-to-date and altered over time. Records kept under the MLR were required to be preserved unaltered, with further records potentially added.
Accordingly, the FTT concluded that the MLR does not require law firms to maintain a register and they are not therefore a relevant data holder for the purposes of Schedule 23.
This decision is to be welcomed. Had the FTT agreed with HMRC, all law firms would be relevant data holders and liable to receive notices under Schedule 23. HMRC had issued ten law firms with “test” notices, with the intention of issuing similar notices to other law firms. Presumably, following this decision, all such notices will be withdrawn.
A copy of the decision can be viewed here.