In an effort to combat tax evasion, on 19th February 2013, the Government agreed action with the Isle of Man to clamp down on those who hold undeclared offshore funds in that jurisdiction. The package includes an automatic tax information exchange agreement and the creation of a disclosure facility to assist those who wish to regularise their tax affairs.
The disclosure facility will allow investors with accounts in the Isle of Man to come forward and settle their back-taxes before information on their accounts is automatically shared with HMRC. Under the automatic exchange of information agreement a wide range of financial information on UK taxpayers with accounts in the Isle of Man will be provided to HMRC every year. It follows hard on the heels of the UK-US agreement to Improve International Tax Compliance and implement FATCA. 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.”
The disclosure facility will run 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 is restrictive, on account of the level of cooperation and transparency HMRC will have in relation to investments in the Isle of Man. The restrictions to the disclosure facility include the fact that it will not be available to those under enquiry by HMRC and unlike the Liechtenstein Disclosure Facility (LDF) – there is no guarantee against criminal investigations for tax related offences. HMRC have stated that their criminal investigation policy will apply to suitable cases. Finally, those previously under investigation will not be able to benefit from the guaranteed penalty rates or start date of liabilities arising (6th April 1999).
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