The latest agreements to improve international tax compliance
In November 2013, Tax Information Exchange Agreements (TIEAs) were signed between the UK and Cayman Islands, British Virgin islands, Bermuda, Anguilla, Montserrat and the Turks and Caicos Islands.
These new TIEAs allow the automatic exchange of financial information between the two governments, allowing HM Revenue & Customs (HMRC) to ensure that the correct amount of tax is being paid by those with financial assets in these British Overseas territories.
HMRC believes that there are many taxpayers who have not declared the existence of these assets or the income and gains arising on them each year. Sometimes this can be a mere oversight, sometimes it is a lack of understanding of the UK tax legislation, particularly concerning residency and domicile.
What sort of information will HMRC receive?
The information to be exchanged under these agreements will relate to 2014 and will include details on the taxpayer concerned such as name, UK address, date of birth, UK National Insurance Number, account balances, cash or surrender values, proceeds for the sale or redemption of property, dividends, and the name of the Financial Intermediary. All mailing instructions including Post Office box numbers, “in care of” or “hold mail” are to be reported along with powers of Attorney and any other signatory authority.
Under the TIEAs, Reporting Financial Institutions are to apply due diligence procedures to identify all United Kingdom Reportable Accounts with balances initially in excess of $50,000. Those with balances below $50,000 (approximately £35,000) have to be identified by Financial Intermediary by the 30 June 2016.
What should UK taxpayers do?
HMRC have already begun writing to UK taxpayers to encourage them to come forward and disclose any undeclared income and gains.
UK taxpayers have until September 2016 to disclose all the details to HMRC for all relevant years and pay the tax owed, plus interest and penalties. Unlike the Crown dependencies of Jersey, Guernsey and the Isle of Man, none of these British Overseas territories have their own Disclosure Facility, however taxpayers are able to utilise the Liechtenstein Disclosure Facility (LDF) to declare assets in these jurisdictions.
Gibraltar, which already operates the relevant transparency directives as part of the EU, has also made the same commitments as the territories detailed above.