British son-of-FATCA tax havens have won a reprieve from reporting the financial affairs of investment clients.
HM Revenue and Customs has put off the reporting rules on tax information exchanges with British Crown Dependencies and Overseas Territories for six months.
The announcement was made alongside a similar move to delay reporting information on US taxpayers to the US Internal Revenue Service under the Foreign Account Tax Compliance Act (FATCA).
The starting date for the UK tax exchange agreement is now August 15, 2013.
The British government revealed that all offshore financial centres linked to the UK had agreed to exchange information under FATCA for US taxpayers and son-of-FATCA for UK citizens.
The agreement also means British offshore financial information on US taxpayers will automatically be collected and reported to the IRS.
Pushing back the reporting deadline means the 2013 tax year is excluded from FATCA and the British FATCA.
Financial details for 2014 and 2015 will have to be reported to HMRC by September 30, 2016.
Tax expert Reg Day of Pinsent Masons, said: “The change of tax regime means anyone has not declared interest, dividends or chargeable gains generated from offshore accounts runs a serious risk of running up tax penalties.
“Anyone who has not declared this income should do so before HMRC or the IRS comes looking for them. If they do, the tax and penalties are likely to be much less.”
Holding assets or earning income from an offshore account is not illegal in the US or Britain, but failing to declare the income on a tax return is tax evasion and a criminal offence in both countries.
FATCA information exchange
FATCA is aimed at ensuring US taxpayers declare such earnings and pay any tax due to the IRS on foreign accounts worth more than $50,000, while the British agreement demands that UK taxpayers do the same to HMRC.
Crown dependencies and British overseas territories will have to tell the HMRC:
- Names and addresses and dates of birth of client holders
- Account numbers
- Balances and details of payments made into those accounts
The agreement covers individuals, companies and trusts and also commits the offshore financial centres to disclose more information about company beneficial owners, directors and shareholders.
The financial centres covered include the Isle of Man, Guernsey, Jersey, Anguilla, Bermuda, the British Virgin Islands, the Cayman Islands, Gibraltar, Montserrat and the Turks and Caicos Islands.