Platforms lack ERI reporting tools despite offering offshore funds

Investment platforms lack excess reportable income (ERI) liability reporting tools, despite offering offshore funds, analysis from Financial Software Ltd (FSL) and Raw Knowledge has found.

The firms noted that while 93 per cent of platforms offered offshore funds, only 55 per cent provided tools to help advisers and their clients identify and report ERI liabilities.

FSL and Raw Knowledge warned that this gap could leave investors at risk of significant penalties from HMRC.

Clients could be exposed to unforeseen tax consequences where offshore funds are held within general investment accounts (GIA) when ERI needs to be reported to the taxman, they added.

Failing to report ERI liabilities or reporting incorrect information can lead to penalties of up to 200 per cent of the tax due.

Since 2023, platform support for ERI reporting has increased by just 13 per cent, despite the increased usage of offshore fund ranges, according to the analysis.

The issue is being exacerbated by greater demand for MPS solutions, as MPS ranges tend to include offshore funds that require ERI reporting if held in a GIA.

The firms highlighted that HMRC is intensifying its focus on overseas income, with tax reporting capabilities becoming an important consideration for advisers when assessing platforms.

“Platforms have expanded access to offshore funds in recent years, giving investors more choice and more opportunities for growth, but unfortunately the supporting tax reporting infrastructure hasn’t kept up, creating a real Consumer Duty blind spot for advisers,” commented FSL managing director, Michael Edwards.

“In my view, if platforms allow exposure to offshore investments, they should equip advisers with the tools to manage the resulting tax complexity. Anything less leaves clients vulnerable to potentially significant and avoidable penalties from HMRC.”

Raw Knowledge managing director, Preya Patel, added: “Frustratingly for everyone, ERI data remains fragmented, inconsistent, and difficult to access.

“There’s no standardised framework for how funds publish this information, meaning even the most experienced advisers can struggle to get complete and reliable figures for their clients.

"From a Consumer Duty perspective, this raises an important question for platforms. You could argue that offering offshore funds to invest in, without being able to satisfy ERI reporting requirements, means that investors are not provided with the support they need to avoid foreseeable harm.”

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