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Isle of Man deal opens new disclosure facility

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20th Feb 2013
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Britons hiding money in the Isle of Man have three years to own up or face heavy fines under the government’s latest arrangement to counter offshore tax evasion.

The agreement, announced yesterday, includes a disclosure facility to allow investors with accounts in the Isle of Man to come forward and settle their past affairs before information on their accounts is automatically shared between the two governments.

The disclosure facility will operate from 6 April 2013 until September 2016. It will not be open to individuals already under investigation but will cover liabilities dating back to April 1999. 

There will be a penalty charge of 10% of unpaid tax up to 2009 and 20% for later years. Those who do not come forward will face “significantly higher” penalties and may face prosecution.

Chancellor George Osborne said: “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."

"I welcome the progress made with the Isle of Man and look forward to working on this new standard in the automatic exchange of tax information.”

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 US rules, allow information to be shared across borders.

The Isle of Man agreement follows similar tax deals with Liechtenstein and the Swiss government. 

The agreements aim to boost tax receipts at minimal cost to the UK tax authority by encouraging people to come clean about tax owed in return for lower penalties.

In January, HMRC said that it had received the first installment of £342m from the UK-Swiss agreement. The agreement is forecast to bring in over £5billion over the next six years.

John Hood of Gabelle Tax said the Liechtenstein Disclosure Facility’s penalties were lower than the Isle of Man’s, making it a better option for many Britons who want to settle their tax affairs on offshore assets.

Phil Berwick, partner at Pinsent Masons said that taxpayers should be aware that the Isle of Man facility does not offer immunity from prosecution, unlike the Liechtenstein Disclosure Facility, which will run until April 2016.

“Given the increased appetite for prosecution by the authorities, taxpayers must consider their preferred disclosure route carefully," he added.

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