The targets of Britain’s ‘Son of FATCA’ proposed law to find out about cash and investments taxpayers hold overseas is becoming clearer.
A list of offshore financial centres has emerged as the focus of the move.
Dubbed ‘Son of FATCA’ after the US Foreign Account Tax Compliance Act (FATCA), the British law will require financial institutions in offshore centres like the Channel Islands, Bermuda, the Isle of Man, British Virgin Islands, Caymans Islands and Gibraltar to hand over financial information about UK taxpayers.
Financial commentators believe the law will come in to force and are urging British taxpayers to ready for the inevitable by putting their tax affairs in order.
If HM Revenue & Customs finds any UK taxpayers shielding cash and investments from tax offshore, penalties of up to double the amount of unpaid tax plus interest are levied – and serious offenders could face criminal prosecution.
However, HMRC recognises that many people want to put their tax affairs in order and are pointing them towards the Liechtenstein Disclosure Facility (LDF).
Anyone who looks likely to be caught in the new legislation needs to act now and shelter under the generous terms offered under the LDF to put their affairs in order.
The scheme offers a tax solution to anyone who had an offshore account or asset on September 1, 2009, and a financial connection with Liechtenstein – a bank account comes under this heading.
Essentially, anyone who has paid too little tax can open a bank account in Liechtenstein and begin negotiations to resolve their tax problems with HMRC.
By using the LDF, you will automatically receive a ‘no prosecution’ guarantee and the opportunity of having a ‘look back’ period of just 13 years – rather than the standard 20 years – to April 6, 1999.
In addition, HMRC will only impose a tax rate of 10% on the first 10 years and then 20% for the three most recent years.
HMRC has doggedly tracked down tax evaders and the new legislation enables them to find information in places traditionally considered as tax havens.
The US FATCA laws are due to start from January 1, 2014, and compel foreign financial institutions hold cash or investments for US taxpayers to reveal the details to the US Internal Revenue Service.
Around 50 countries have signed up or indicated they will sign up to FATCA – including Britain, which was the first country to finalise an agreement.
Under the terms, the US will send financial information about British taxpayers with holdings in the States to HMRC.