Statement of high net worth

This helpsheet has been issued by ICAEW’s Technical Advisory Service to help members understand whether they can sign statements of high net worth for their clients.

Members may also wish to refer to the following related helpsheet and guidance:

• References on clients’ financial status
• ICAEW TECH 10/12 AAF Reporting to third parties
• ICAEW TECH 02/01 AAF Requests for references on clients’ financial status and their ability to service loans

Members may be asked to sign statements of high net worth under articles 60H(1)(d) and 60Q(c) of the Regulated Activities Order. As per the Consumer Credit Sourcebook (CONC) Appendix 1.4.3, a member of ICAEW is eligible to sign such a statement.

However, we would advise caution over the duty of care that may arise in making such a statement as the individual has to understand that by making their declaration they will not have the benefit of the protection and remedies that would be available to them under the Consumer Credit Act 1974 or the Financial Services and Markets Act 2000. Therefore we would recommend consulting technical releases ICAEW TECH 10/12 AAF Reporting to third parties and ICAEW TECH 02/01 AAF Requests for references on clients’ financial status and their ability to service loans, before accepting any such engagement.

The statement requires confirmation that the individual is of high net worth because they received during the previous financial year net income totaling an amount of not less than1 £150,000 and/or they had throughout that year net assets with a total value of not less than £500,000. The wording is available in the CONC Appendix 1.4.7 which also includes relevant definitions. The main area of risk is that while income and assets may be relatively easy to verify, the existence and extent of liabilities may not.

The statement is made under the Consumer Credit Act 1974 and, if the member does sign the statement, a duty of care may very well arise. Hence, it may be appropriate to have a suitable engagement letter and also carefully consider the wording included in the statement before issuing it. We would also recommend the member to contact their provider of PII cover before commencing the engagement.

Members are most likely to be asked to sign a statement of high net worth in relation to the Consumer Credit Act 1974 (as explained above). The term ‘high net worth’ is however also used in other contexts with alternative meanings.

Financial promotions

Article 48 of The Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (SI 2005/1529) offers an exemption (subject to various conditions) with regard to financial promotions made to certified high net worth individuals.

High net worth statements in this context are self-certified and should normally be in the format specified in Schedule 5 to the order. The statement requires confirmation that the individual is of high net worth because their annual income in the preceding year was to the value of £100,000 or more and/or they held net assets throughout the preceding year to the value of £250,000 or more (subject to a number of exclusions).

Annual return

Please note for the purposes of the annual return question AML15 requires disclosure of the number of high net worth individuals for which a firm acts. Guidance is contained within the annual return guidance notes (available on the Annual return webpage) which specifies the following:

Based on the information you currently hold on your personal tax clients, include all personal tax clients that have personal wealth greater than £20m and are considered ‘wealthy individuals’ by HMRC.

Annual return questions are periodically updated and therefore the most recent guidance should be consulted when submitting an annual return.

ICAEW members, affiliates, ICAEW students and staff in eligible firms with member firm access can discuss their specific situation with the Technical Advisory Service on +44 (0)1908 248 250 or via webchat.