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New agreement includes three-year disclosure opportunity
Isle of Man to share data on UK taxpayers Related articles: UK and US sign accord to combat evasion Don’t forget the LDF! New agreement includes three-year disclosure opportunity
Taxpayers with money hidden in the Isle of Man are to be offered a three-year window in which to come clean without risk of major sanctions.
The disclosure initiative from HMRC will run from 6 April 2013 until September 2016. Liabilities arising since April 1999 will have to be fully disclosed in exchange for a guaranteed penalty rate of between 10% and 20% on unpaid tax.
The scheme is part of an anti-evasion deal between the UK and the Isle of Man that includes an automatic tax information exchange agreement, which will be used to raise significantly higher fines against individuals who fail to come forward to settle their past affairs.
A wide range of financial data on UK taxpayers with accounts in the crown dependency will be reported to the Revenue automatically each year, in a system based on the Anglo-American accord to improve international tax compliance and minimise burdens on financial institutions.
Andrew Watters, a director at legal services provider Thomas Eggar, suggested that taxpayers with offshore assets should “consider whether they are exposed to challenge. Some, including non-domiciled individuals, may have an over-optimistic view of their tax position. If there is an undisclosed liability, there are opportunities to gain advantageous terms by making a voluntary disclosure.”
Prompt action would be prudent, he added. “For anyone who is thinking of waiting, the danger is that their name comes to the attention of the UK authorities before they make a voluntary disclosure and the option disappears.”
Pinsent Mason’s Phil Berwick noted that the Isle of Man opportunity will be less generous than its Liechtenstein counterpart. “The good news is that the Liechtenstein disclosure facility can be used instead, and will offer, for many, significantly better terms,” said the law firm partner.
“Under the Isle of Man facility, tax must be paid at the time of the application, unless HMRC agree otherwise. This exposes taxpayers to a greater risk of discovery by the Revenue because it means the relevant computations must be carried out in advance of the application being submitted,” added Berwick.
As the new anti-evasion again places emphasis on compliance and transparency, financial institutions will need to pay greater heed to “the places in which they do business, the people with whom they do business and the type of business they do”, said Jim Muir, director of financial data manager AutoRek.
“Organisations need to prepare people, processes and systems so that they can achieve and demonstrate a robust, single-view of customers and report on their clients and past activity when required.”
