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February 19, 2013 8:24 pm
Britons hiding money in the Isle of Man have three years to come clean or face penalties of up to 200 per cent of unpaid tax in the latest move to clamp down on tax evasion.
The move is part of a deal struck by the government on Tuesday with the Isle of Man to automatically exchange financial information on taxpayers. The agreement includes the “disclosure facility” to allow account-holders on the island to come forward and settle outstanding tax bills, plus interest, before their details are passed to HM Revenue & Customs.
The disclosure facility is expected to start on April 6 and run until September 2016. It will not be open to individuals already under investigation but will cover liabilities dating back to April 1999. The facility offers immunity from prosecution but, in most cases there will be a penalty charge of 10 per cent of unpaid tax up to 2009 and 20 per cent for later years. Those who do not come forward could be hit by a penalty of up to 200 per cent of the unpaid tax, or prosecution.
The Treasury said the deal was modelled on an agreement with the US to improve international tax compliance – the Foreign Account Tax Compliance Act (Fatca). The UK and Isle of Man’s version of Fatca will, like the US rules, allow for the sharing of information across borders.
George Osborne, the chancellor, said the agreement built on the government’s work to combat tax evasion, including agreements with the US and Switzerland, and talks with Jersey and Guernsey over similar deals.
“The government is committed to tackling tax evasion and this agreement will greatly enhance HMRC’s ability to clamp down on those who try to hide their money offshore,” said Mr Osborne. “Tax transparency will be a focus of the UK’s G8 presidency, where it will look to further promote automatic information exchange.”
Eddie Teare, the Isle of Man Treasury minister, said the deal would provide confidence to international investors that they were “dealing with a regime which complies [with] global standards of best practice”.
Fiona Fernie, tax investigations partner at accountancy firm BDO, said she expected the disclosure facility to be a cost effective way to encourage those with undisclosed assets on the Isle Man to come forward.
“Whilst prosecution remains a key deterrent for HMRC, the significant backlog of cases has been well documented,” she said, “so it’s crucial for them to take a cost effective approach and, wherever possible, encourage voluntary disclosure, via bilateral tax agreements, focused disclosure schemes and increased information gathering.”
This deal is the latest example of the revenue’s increasingly pragmatic approach and follows on from the Liechtenstein Disclosure Facility and Swiss-UK tax agreement which, between them, are expected to bring in billions of pounds of revenue to the Treasury.
The Revenue has set a target of £3bn by 2016 for revenue it expects to gain from the LDF, and a figure of £5bn over the next five years.
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