The Isle of Man has agreed to automatically exchange information with the UK on tax matters. The agreement is backed by a form of tax amnesty to allow UK taxpayers to regularise thei
The Isle of Man has agreed to automatically exchange information with the UK on tax matters. The agreement is backed by a form of tax amnesty to allow UK taxpayers to regularise their affairs if necessary.
The agreement was initialled on 19th February, following three months of intensive negotiations. An HM Revenue & Customs (HMRC) statement explains that it forms an integral part of the Government?s offshore anti-evasion strategy which will be published later this year.
When it comes into force, which is expected to be in January 2014, Manx financial institutions will provide a broad range of information on bank accounts and other financial assets owned by UK taxpayers. This will be automatically shared with the UK tax authorities by their Isle of Man counterparts.
The fine detail still needs to be confirmed, particular in the case of non-domiciled UK taxpayers who will not be subject to the same reporting regime as other UK taxpayers.
The Isle of Man government explains that the agreement extends the level of cooperation with HMRC, and that it ensures that the jurisdiction continues to lead from the front on implementing best standards on tax transparency and information exchange.
As part of the arrangement, HMRC will offer a special disclosure opportunity for UK taxpayers with undeclared assets in the Isle of Man. More details will be released soon, but we do have the key facts.
- It will start on 6th April 2013 and end in September 2016.
- Taxpayers must fully disclose all tax liabilities arising from April 1999 onwards.
- Penalties will be reduced to 10% of the tax due for liabilities that should have been declared prior to April 2009, and 20% for those after.
- Obviously, all due tax will have to paid.
- Anyone already under an HMRC enquiry or who has been previously investigated is excluded from this opportunity.
- There is no guarantee of immunity from criminal penalties and HMRC?s usual criminal investigation policy will apply.
HMRC has said it will seek high penalties against those who do not disclose their assets and regularise their tax affairs ? penalties could potentially be as high as 200% of the unpaid tax.
UK Chancellor, George Osborne, said that the agreement builds on the groundbreaking work the government has already carried out. Mr Osborne went on to say that it is ?committed to tackling tax evasion and this agreement will greatly enhance HMRC?s ability to clamp down on those who try to hide their money offshore?.
It follows tax deals made with Switzerland and Liechtenstein, and although they work differently, the aim is always to boost tax receipts at minimal cost to the UK by encouraging people to come forward voluntarily.
This new UK/Isle of Man deal is modelled on the US Foreign Account Tax Compliance Act (FATCA) agreements. This is intended to crack down on US citizens who hide money in offshore accounts and ensure all tax is paid on income generated from overseas assets. Although this is very unpopular with both clients and financial institutions, experts have been warning that other countries are likely to consider similar measures.
Mr. Osborne confirmed that the UK was already in discussions with Jersey and Guernsey as part of their common commitment to combat tax evasion. At the end of February the Jersey government asked the jurisdiction?s finance industry to consult on the possibility of entering a similar agreement with the UK.
Jersey Finance, the industry?s representative body, is encouraging the Jersey government to continue requesting the UK to promote automatic exchange of information worldwide, on a level playing field basis.
HMRC has said that tax transparency will be a focus of the UK?s G8 presidency, where it will look to further promote automatic exchange of information
The Chief Minister of the Isle of Man, Allan Bell, believes that automatic exchange of information is likely to become the ?international standard? and said that territories ?that try to swim against the tide of international change and sentiment run the risk of being labelled as a tax haven?.
Wherever you live, your tax planning should always be fully compliant with the local tax law. For advice on the legitimate opportunities to lower your tax liabilities here in your country of residence, contact Blevins Franks which specialises in tax planning for British expatriates in Spain, France, Portugal, Cyprus and Malta.
27 February 2013
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 should take personalised advice.