Guernsey and Jersey signed Automatic Information Exchange Agreements with the UK on the 22 October 2013 – the ‘UK-Guernsey Agreement to Improve International Tax Compliance’ and the ‘UK-Jersey Agreement to Improve International Tax Compliance’. This means transparency between the tax authorities will be higher, and taxpayers trying to hide funds offshore will find that details are sent to HMRC.
The new agreements mean that all the Crown Dependencies have now entered into automatic tax information exchange agreements with the UK, with the Isle of Man having signed on 10 October 2013.
The net is closing in on taxpayers trying to evade tax, but for those wanting to come forward, beneficial disclosure regimes are still in operation in the Isle of Man, Guernsey and Jersey, as well as the on-going Liechtenstein Disclosure Facility.
Eaves and Co have assisted a number of clients with making disclosures of offshore income to HMRC and would be happy to hear from anyone wishing to come forward under these schemes.
Eaves and Co have assisted a number of clients to make disclosures under the Liechtenstein Disclosure Facility (LDF) as well as advice for those affected by the UK-Swiss Tax Treaty. HMRC have made clear that they continue to target offshore funds with more recent disclosure facilities in Jersey, Guernsey and the Isle of Man.
The LDF has been very successful for HMRC and they have even increased the expected yield from £1billion to £3billion.
We have written previously on the differences between the LDF and other disclosure facilities, in particular the more favourable guaranteed immunity from prosecution under the LDF.
A further, and often overlooked, aspect of the LDF which can be much more favourable than the other disclosure facilities is the ability to elect for a composite rate of tax rather than the actual rate. This can mean significant savings where Inheritance Tax is involved. As such, it might be worth those with funds in Jersey, Guernsey or the Isle of Man considering making a disclosure under the LDF where IHT is involved.
We would be delighted to hear from anyone seeking assistance in this area.
This new tax year sees the opening of new tax disclosure facilities for offshore tax havens of Isle of Man, Jersey and Guernsey. They offer a streamlined disclosure method for offshore hidden funds with a laid down table of reduced penalties for tax errors.
In many ways these new tax treaties are similar to the Liechtenstein Disclosure Facility (LDF) which has been operating for some time now. It therefore makes sense to consider them in the light of experience and lessons learned from the LDF.
The new opportunities to disclose run from 6 April 2013 to 30 September 2016. Whilst 2016 currently sounds a long way off. It is surprising how fast time goes by. Experience with LDF suggests that people are liable to procrastinate, so the sooner they get relevant information, the more likely it is they will take appropriate action before it is too late.
Registering sooner rather than later gives greater protection, because HMRC enquiries continue, and those caught in an investigation are too late to take advantage of the benefits of reduced penalties and time scope of those disclosure schemes.
Whilst Accountants hope that all their clients are honest and do not need specialist disclosure facilities, as a firm dealing in serious tax investigations we see that such hopes are sometimes dashed. It is useful to make all clients aware of the disclosure facilities, because even the most honest ones may have funds or relations who requires help. Specialist advice is essential (we can help). Sometimes the happiest way forward can be just to provide the client with contact details, so that the existing client relationship is unaffected.
HMRC announced three more disclosure facilities in quick succession as they attempt to tighten the net on tax evaders operating closer to the UK. Memoranda of understanding have been signed with the Isle of Man, Jersey and Guernsey in the last few months meaning more and more taxpayers could be under scrutiny.
Whilst co-operation with HMRC from the above jurisdictions is another nail in the coffin for tax evaders operating off the coast of the UK, these disclosure facilities offer a great opportunity for individuals to wipe their slate clean and take preemptive action.
If individuals come forward under one of the disclosures they will be liable to reduced penalties – which can result in sizeable savings when compared to an ad hoc disclosure or HMRC investigation.
However the disclosure facilities do not offer immunity from criminal prosecution, therefore individuals may wish to disclose using the Liechtenstein Disclosure Facility (LDF). The LDF can be used on worldwide assets providing sufficient funds are transferred to a financial intermediary in Liechtenstein. The LDF offers both reduced penalties (as low as 10%) and immunity from criminal prosecution.
This is certainly an area in which to be proactive on as under the terms of the agreements the jurisdictions will provide HMRC with details of suspected evaders in due course.
Therefore disclosing to HMRC before they come ‘knocking’, not only secures reduced penalties but also allows individuals a greater element of control as to the manner and time frame in which they disclose. This offers piece of mind to the individuals involved.
In addition to the above HMRC are also looking to sign similar agreements with British overseas territories. There are 14 such territories including Bermuda, the British Virgin Islands and the Cayman Isles.
In a recent First-tier tribunal case, the taxpayer, a Swiss national, was employed in the UK and claimed he was resident but not ordinarily resident in the UK.
His salary was paid into a bank account in Guernsey, and part of the money was transferred to an Isle of Man bank account held jointly with his girlfriend. The remainder of the funds were used in the UK.
Some of the money in the Isle of Man account was used to pay bills in the UK which was agreed as having been remitted to the UK. Further amounts were spent in the UK by his girlfriend.
HMRC had argued that all the money in the joint account should be regarded as the taxpayer’s, and therefore any sums spent in the UK should be treated as remitted.
The taxpayer argued that the account was opened in joint names to provide funds for his girlfriend as she was unable to open a bank account in her name as she was a student and not eligible to work in the UK.
The First-tier Tribunal found this explanation ‘wholly plausible’ and accepted that the account was fully controlled by the taxpayer’s girlfriend. Therefore none of the withdrawals made by her should be regarded as remittances by the taxpayer.
If you would like further advice on any of the topics discussed, please contact us by: