UK Offshore Centres Under Attack Again?

21.02.12

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UK Labour leader Ed Miliband ruffled a few feathers when he attacked the British crown dependencies for being ?tax havens? and called for action to be taken against them. This is rat

UK Labour leader Ed Miliband ruffled a few feathers when he attacked the British crown dependencies for being ?tax havens? and called for action to be taken against them. This is rather familiar territory as we?ve seen the previous Labour government commission reviews into the tax practices of Jersey, Guernsey and the Isle of Man. They have actually improved their tax transparency considerably over the last decade or so, particularly the Isle of Man and Guernsey which have effectively ended banking secrecy for EU residents.

It was reported in the UK press in January that Miliband would demand that the UK government forces Jersey, Guernsey and the Isle of Man to reveal the identity of British tax ?evaders?. He told newspapers, through a Labour spokesman, that he was asking the government to press for tougher EU action against so called tax-havens, with the UK?s dependencies to be targeted first.

He urged the government to begin negotiations with the islands to reveal the names of wealthy UK investors, and for ministers to follow up the talks with threats to shame them on the international stage by placing them on the globally recogonised blacklist drawn up by the Organisation for Economic Co-Operation and Development (OECD). It is thought this will be included in Labour?s 2015 election manifesto as part of its budget reduction strategy.

The Channel Islands and Isle of Man were quick to retaliate.

Isle of Man Chief Minister, Allan Bell, ?swiftly and firmly refuted? the comments, saying the Isle of Man had become ?collateral damage? in a wider debate going on in UK politics. He described Miliband?s statement as ?very disappointing? and ?based on a lack of understanding on his part of the progress the Isle of Man has made over the last decade?.

He said the Isle of Man took a proactive stance towards tax regulation and it had repeatedly been judged to be co-operative and compliant with internationally agreed standards.

He hit back at the claim that the jurisdiction was co-operating with the UK authorities: ?We have an automatic tax exchange agreement with the UK and we were the first jurisdiction to agree to an automatic exchange agreement with the whole of the EU.?

The head of Jersey Finance, Geoff Cook, pointed out that tax evasion is illegal in Jersey and that ?it is a criminal offence ? not a civil one ? to facilitate or engage in tax evasion?. He said that characterising Jersey as a ?tax haven? fails to recognise the regular endorsements the island has received from the OECD and IMF, and that the accusation that Jersey is not co-operative with HMRC ?is quite simply wrong.?

Tax transparency in the crown dependencies is almost incomparable to a decade or so ago.

In January 1998 the UK (Labour) government announced its Offshore Review to investigate the tax haven practices of Jersey, Guernsey and Isle of Man, headed by Andrew Edwards. By the end of 2000 they had introduced all the significant recommendations of the Edwards Report, including exchange of information treaties and cooperation agreements to counter tax evasion.

They signed up to the EU Savings Tax Directive which began in July 2005, offering clients a choice of automatic exchange of information or a withholding (?retention?) tax, the latter allowing clients to retain banking secrecy (even though they are still meant to declare interest earnings in their country of residence). In July 2008 the tax rate increased from 15% to 20%.

In April 2009 the Channel Islands and Isle of Man were placed on the OECD ?white list? of countries which have substantially implemented the internationally agreed tax standard.

The Isle of Man made a surprise announcement at an OECD conference in Paris in June 2009, declaring that it would move to automatic exchange of information only from July 2011. Bell said this was ?further evidence that the Isle of Man is prepared to align its policies with international benchmark standards?.

In July 2010 Guernsey announced that its financial institutions would move to automatic exchange of information between January 2011 and July 2011.

So since 1st July 2011, both Guernsey and the Isle of Man no longer offer the withholding tax option to EU residents and automatic exchange of information is applied to all EU residents. Interest is paid gross and your name, address, account number and amount of interest paid is reported to the tax authority in your country of residence each year.

For the moment Jersey still offers the withholding tax, and the rate increased to 35% in July 2011.

In a report by the OECD for the G20 in November 2011, the Isle of Man was listed as one of only eight jurisdictions found to have all elements of effective information exchange in place.

If you want to lower your tax liabilities on your savings and investments, you need to use tax planning arrangements which are authorised and compliant for your country of resident. An adviser like Blevins Franks will guide you through your options.

By Bill Blevins, Managing Director, Blevins Franks

9th February 2012

The tax rates, scope and reliefs may change. Any statements concerning taxation are based upon our understanding of current taxation laws and practices which are subject to change. Tax information has been summarised; an individual must take personalised advice

Tax rates, scope and reliefs may change. Any statements concerning taxation are based upon our understanding of current taxation laws and practices which are subject to change. Tax information has been summarised; individuals should seek personalised advice.

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