Hiding cash offshore has just become harder as another major tax haven has lifted the veil of secrecy that covered investment transactions for the wealthy.
The Isle of Man has signed a deal which will clampdown on those trying to hide money offshore by agreeing to exchange tax information on UK taxpayers with HM Revenue and Customs.
However, the new agreement has a ‘disclosure facility’ which allows investors to step forward and settle their tax bills, plus interest, before their details are investigated by the tax man.
The incentive is avoiding penalties of up to 200% of the unpaid tax and immunity from prosecution.
The penalty charges imposed for volunteering information will be 10% on unpaid tax up to 2009 and 20% in the subsequent years.
UK’s own FATCA
Those failing to declare their liabilities will face possible prosecution.
This facility will run from April until September 2016 and those using it can declare their liabilities going back to April 1999. Anyone currently under investigation by HMRC cannot volunteer.
The Isle of Man is the latest to join the UK’s bid to crack down on offshore tax havens and the agreement is modelled on America’s Foreign Account Tax Compliance Act (FATCA) which countries around the world are signing up to.
FATCA compels a foreign financial institution (FFI) to handover information on US taxpayers to the treasury and a failure to comply with the law will see hefty penalties being imposed of a 30% withholding charge on all transactions between the FFI and the US.
However, implementing FATCA for many financial institutions would lead to them compromising laws in their own countries which in turn has led governments arranging new tax agreements to get around this problem.
Offshore accounts uncovered
George Osborne, the Chancellor of the Exchequer, said: “The agreement between the Isle of Man and the UK will enhance HMRC’s ability to uncover those who are trying to hide their money in offshore accounts.
“We are committed to tackling the issue of tax evasion and I welcome the progress that has been made with this agreement which sets a new standard in the automatic exchange of tax information.”
He added that the new agreement builds on the work done on information swapping deals between the UK and the US and Switzerland.
The UK is taking a leading role on tax transparency with the G8 which is also looking to promote more agreements for automatic exchange of tax information.
