One of the world’s most popular offshore tax havens is about to sign a new deal which will reveal the accounts of all UK taxpayers to HM Revenue and Customs (HMRC).
Thousands of British investors and savers hold around £4 billion in accounts on the Channel Island which has previously drawn a veil of secrecy over their financial dealings.
Now assets controlled by British taxpayers will now be revealed to HM Revenue and Customs.
The deal about to be inked follows a similar agreement reached with the Isle of Man for disclosure and Guernsey’s move now puts pressure on the fellow Channel Island financial haven of Jersey to sign as well.
The move by the UK government for all British Crown dependencies and territories to sign new tax agreement follows the implementation of America’s Foreign Account Tax Compliance Act (FATCA) which is aimed at revealing the financial accounts of all the US taxpayers living and working around the world.
Increasing numbers of countries are signing up to the law to enable their financial institutions to disclose details of American clients without falling foul of domestic laws such as privacy and data protection.
Fears were raised several months ago that the UK government was about to implement a similar version of the law, which was dubbed ‘Son of FATCA’.
Now the deal with Guernsey will see British taxpayers with accounts and trusts on the island having to declare any unpaid tax by September 2016 or face hefty penalties from HMRC of up to 200%.
Anyone currently under investigation will not be able to enjoy the protection being provided by coming forward to make a declaration.
Guernsey already discloses the interest paid on its accounts under EU law but the new agreement will enable the account balances to be revealed.
Those account holders who are considered to be ‘non-domiciled’ will have to comply with slightly different rules. There is thought to be around £2 billion held by such account holders and they will have to disclose their tax affairs from 2016.
Peter Harwood, chief minister, said the new agreement will give Guernsey an advantage over other jurisdictions since it highlights the island’s reputation for having a well-regulated financial sector and transparent tax system.
Guernsey says it still has to negotiate with the US over how it implements FATCA since any agreement will have to be guaranteed by the UK government under international law.
The US agreement is set to take place from January 1, 2014, and both tax deals will have to be ratified by the island’s parliament.
Tony Mancini, of KPMG’s Guernsey office, said: “Without a US agreement it would make it very hard for Guernsey to transact with the global financial services world. We had to have the US agreement – so we got to the point of having to have the UK agreement.”