THE UK AND ISLE OF MAN have struck a deal in a bid to clamp down on offshore account holders, as the pressure on tax havens mounts.
The information-sharing deal – the first struck with a Crown dependency – will see financial information on UK taxpayers with accounts in the Isle of Man reported to HM Revenue & Customs automatically every year.
UK residents with assets concealed on the island will have until September 2016 to disclose details to the taxman and pay any tax owed to the HMRC, as well as a fine between 10% and 20%. While in most cases, the deal will see evaders escape prosecution, HMRC offered no guarantees.
Unlike a similar deal with Switzerland, anonymity will not be enshrined, while the deal will not have the immunity from criminal prosecution seen in the Liechtenstein Disclosure Facility. The UK received its first payment from Switzerland, amounting to £340m, last month.
The deal will take effect from 6 April, and as yet there are no details of how it will be administered by the taxman. Further details are expected in before April.
However, the facility closely follows a US law, the Foreign Account Tax Compliance Act, which requires governments to disclose the identities of Americans holding assets in their jurisdictions.
Chancellor George Osborne hailed the move as one which “will greatly enhance HMRC’s ability to clamp down on those who try to hide their money offshore”, while expressing hopes that Channel Island nations will follow the Isle of Man’s lead.
Watt Busfield Tax Investigations partner Rebecca Busfield said the UK’s deal with Liechtenstein may appeal to offshore account holders.
She said: “Although the terms are yet to be finalised, the new Isle of Man Disclosure Facility will be similar to the Liechtenstein Disclosure Facility (LDF). However, at the moment it appears that immunity from prosecution for tax evasion will not be guaranteed under the Isle of Man amnesty, so the LDF will be better for anyone with serious tax liabilities.”
BDO tax investigations partner Fiona Fernie added she expects the deal to ease the well-documented backlog of cases awaiting hearings.
She said: “Whilst prosecution remains a key deterrent for HMRC, the significant backlog of cases has been well documented, so it’s crucial for them to take a cost effective approach and, wherever possible, encourage voluntary disclosure, via bilateral tax agreements, focused disclosure schemes and increased information gathering.”
Brexit could hit UK GDP by as much as 3% by 2020, the international economic body has claimed
Governmental pressure to crack down on tax evasion is resulting in HMRC applying its criminal investigation policy in an inconsistent manner, writes Kingsley Napley's David Sleight
Colin takes a wry look at how accountants are funding their retirement
Chancellor releases tax return following the controversy surrounding tax affairs of politicians, reveals connection with accountancy firm HW Fisher & Company