The Government has today agreed action with the Isle of Man to clamp down on those who try to hide their money offshore.
This forms an integral part of the Government’s offshore anti-evasion strategy which will be published later this year. The package includes an automatic tax information exchange agreement and the setting up of a disclosure facility. The disclosure facility will allow investors with accounts in the Isle of Man to come forward and settle their past affairs before information on their accounts is automatically shared.
Under the automatic exchange agreement, a wide range of financial information on UK taxpayers with accounts in the Isle of Man will be reported to HM Revenue & Customs automatically each year. It follows closely the UK-US agreement to Improve International Tax Compliance and to Implement FATCA in order to minimise burdens on financial institutions.
Chancellor of the Exchequer, George Osborne said:
The Government 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. I welcome the progress made with the Isle of Man and look forward to working on this new standard in the automatic exchange of tax information.
Today’s agreement builds on the groundbreaking work we have already carried out - the UK Government has signed agreements with the US and Switzerland so far and we are in discussions with Jersey and Guernsey as part of our common commitment to combat tax evasion.
Tax transparency will be a focus of the UK’s G8 presidency, where it will look to further promote automatic information exchange.
Notes for Editors
The UK and Isle of Man Governments have agreed the main body of an automatic exchange agreement (everything aside from the jurisdiction specific Annexes).
Annex II contains jurisdiction specific elements and will be finalised to the same timetable as the agreement currently being negotiated between the Isle of Man and the United States.
The disclosure facility will operate from 6 April 2013 and run until September 2016. Under its terms, liabilities arising from April 1999 must be fully disclosed and there is a guaranteed penalty rate - 10% for returns to be filed before April 2009 and 20% thereafter. The facility will not be available to those under enquiry by HMRC. Where HMRC uses the information made available under the information sharing agreement, it will be seeking significantly higher penalties.
There is no guarantee against criminal investigation for tax related offences; HMRC’s published criminal investigation policy will apply. Those who have previously been under investigation will not be able to benefit from the guaranteed penalty rates or start date.
FATCA, which is part of the US Hiring Incentives to Restore Employment Act of 2010, aims to combat tax evasion by US tax residents using foreign accounts. It includes certain provisions on withholding taxes and on the reporting of information by foreign financial institutions for US compliance purposes.
On 30 November 2012, Jersey and Guernsey released a joint statement stating that they were in discussions with HM Treasury on enhanced information exchange.
On 1 January 2013, the Government’s agreement with Switzerland to recover previously unpaid UK tax on money hidden in Switzerland came into force.
On 29 January 2013, HMRC announced that it had received the first instalment of £342million from the UK-Swiss agreement. The agreement is forecast to bring in over £5billion over the next six years.