British Crown Dependencies have revealed officials have already met with the government to discuss a UK FATCA like tax agreement.
Now, officials from several dependencies, including Jersey and Guernsey, claim they have met with HM Treasury officials to learn more about the expected legislation.
The move follows the UK’s agreement to help implement requirements laid down in the US’s Foreign Account Tax Compliance Act (FATCA) which would see information on US taxpayer’s bank accounts being shared with the country’s Internal Revenue Service (IRS).
Failure to hand over information will see the US authorities impose a hefty 30 per cent withholding penalty on tax to be paid to the institutions involved.
Rather than give the information over directly, which would breach many countries data protection laws, the UK will share its information in exchange for UK taxpayers accounts being held in the US.
London tax talks
However, it became apparent that the UK intended to share the information from its dependencies, including the Isle of Man and the Cayman Islands, and would create a law to do so.
The UK Treasury believes it will generate around £2 billion in lost tax revenue.
The news emerged after magazine International Tax Review (ITR) said it had seen a leaked document that laid out the plan.
And now representatives from most of the UK’s dependencies are converging on London for the British Overseas Territories Joint Ministerial Council, which will almost certainly discuss the issue.
Allan Bell, the Isle of Man’s chief minister, said any potential changes in law should be viewed against recent global moves towards increased information exchange.
He added: “FATCA requires the automatic collection and sharing of tax-related information with the US authorities. I forecast months ago that other countries would look for similar tax agreements.
Son of FATCA
“We need to deal with this change in approach to tax. Failing to handle change will damage our economy.”
The Isle of Man doesn’t have bank secrecy laws and already complies with international standards on tax co-operation.
Though tax experts in the Channel Islands say the British move, dubbed by some as ‘son of FACTA’ will turn business away as people move to places that do not have a British link.
One real issue is that many firms involved may find the regulation’s extra administrative costs too much of a burden and close down – or simply move somewhere without such regulations.
The British government has declined to comment on whether any legislation is being planned though ITR says an announcement will be made next autumn and legislation in place in 2014.