Out-Law News | 29 Nov 2013 | 5:37 pm | 2 min. read
The states agreed to automatically share information about bank accounts held by taxpayers in their jurisdiction, but resident in another participating state, following a meeting of the Global Forum on Tax Transparency in Jakarta last week.
Details of the signatures emerged as the UK concluded the signing of tax agreements with Bermuda, the British Virgin Islands, Gibraltar, Montserrat and the Turks and Caicos Islands; meaning that most of the Crown Dependencies (CDs) and British Overseas Territories (BOTs) with major financial centres now have information-sharing arrangements in place. The CDs and BOTs have also agreed to be part of the G5 multilateral information sharing pilot.
Chancellor of the Exchequer George Osborne said that international financial centres were beginning to recognise that their success in the future would depend on how open they were about individuals and companies from overseas that held assets in the region.
"This government has been leading the way in pushing for greater tax transparency and information sharing, putting it at the heart of our G8 agenda – the commitments made today demonstrate the considerable and rapid progress that has been made," he said.
"Tax information sharing will provide HMRC with vital information in the fight against evasion as we continue to clamp down on individuals seeking to hide their assets offshore. We have also made significant investment in HMRC's anti-avoidance and evasion work to ensure that people pay the tax they owe," he said.
The multilateral automatic information exchange pilot was announced in April by the G5 largest European economies of France, Germany, Italy, Spain and the UK. The agreement is based on the five countries' model agreement to implement the Foreign Account Tax Compliance Act (FATCA) with the US, which was published in July 2012.
FATCA is designed to prevent tax evasion by US citizens using offshore banking facilities, and introduces reporting requirements for foreign financial institutions (FFIs) with respect to accounts held by US residents. The agreements between the UK and the CDs and BOTs are based on a modified version of this agreement, commonly known as 'UK FATCA'. UK FATCA requires FFIs in certain territories to provide information to their national tax authority about accounts held overseas by UK residents. This information will then be provided to HMRC under exchange of information agreements.
The UK announced in May that all BOTs and CDs with significant financial centres had committed to the introduction of information-sharing arrangements. Only Anguilla has not yet finalised its arrangements. Agreements with most of the BOTs will not be reciprocal, meaning that information will only flow from the BOT to the UK. The agreements with the CDs, and with Gibraltar, allow for a two-way exchange of information.
The agreements will take effect from 30 September 2016. Tax expert Reg Day of Pinsent Masons, the law firm behind Out-Law.com said that taxpayers should take advantage of the disclosure facilities that would be in operation before this date to enable them to resolve any irregularities before HMRC began its own investigations.
"Automatic exchange of information is inevitable, however the ability to have a no-names discussion with HMRC under the terms of the disclosure facilities offers significant opportunities," he said. "Taxpayers can also have the confidence that they will retain some flexibility and control over the flow of information to HMRC and the pace of travel towards tax transparency."