Whilst governmental attacks on tax avoidance seem to be rarely out of the financial news, the UK Government is also tackling tax evasion by entering into information exchange agreements with a number of tax havens, many of which are British Crown Dependencies. This is the latest initiative in a series of disclosure facilities and information exchange agreements.
In September 2012, the UK became the first jurisdiction to enter into an agreement with the US over the implementation of FATCA. The US has since implemented a number of further agreements based on the same model and is negotiating with over 75 countries. The UK Government sees the format of agreement as setting a new standard in international tax transparency and has announced that it will conclude agreements with British Crown Dependencies (Isle of Man, Guernsey and Jersey) and overseas financial centres (Anguilla, Bermuda, BVI, Cayman Islands, Gibraltar, Montserrat and the Turks & Caicos Islands).
It is proposed that information will flow in both directions between the Crown Dependencies and the UK, but only from the other territories to the UK, and not vice-versa. However, both of these will include an election to be used by UK residents but non domiciled persons to report only information relevant under the remittance basis.
Currently we have a draft agreement, but the Finance Act 2013 contains powers enabling the Government to implement the agreements with Crown Dependencies by Regulations (the agreements with the other territories will not need these Regulations).
The scope of information to be reported includes: personal details (name, address, etc. – there will be regulations over the information to be gathered by the financial institution on its account holders); account number; name (and if relevant the Global Intermediary Identification Number) of the Financial Institution; the account balance or value at the end of the year (or upon account closure); gross income or gains in the account.
It is intended that the reports commence in 2016 (one year after the FATCA reporting commences), however, the first report will provide a catch up on certain information back to 2013. Relevant financial institutions must make the reports by 31 May each year. However, they must have completed their due diligence by 31 December 2015 (essentially, they must search their client base based on certain criteria) and a review of pre-existing higher value accounts must be completed by 31 December 2014.
Whilst the administrative side of these proposals is out for consultation (closing 6 September 2013), there is little doubt that the substance will be implemented. Viewed over time there is a progression towards information exchange and cooperation, whether through bilateral/reciprocal agreements, under the umbrella of an international organisation (for example, the EU Savings Directive or the OECD) or disclosure facilities (for example, the Swiss, Liechtenstein and Isle of Man agreements with the UK or the US Offshore Voluntary Disclosure Initiative). Indeed, the OECD has proposed the standard automated exchange of information based on a common platform implemented under a multilateral convention.