HMRC’s powers to obtain information on UK taxpayers with foreign bank accounts is increasing day by day, with the recent signing of the so-called “G5 Tax Agreement” between the UK, France, Germany, Italy and Spain. The UK Government’s attack on “tax havens” has been bolstered by additional news that similar agreements have now been discussed with British Overseas territories including Anguilla, Bermuda, the British Virgin Islands, Gibraltar and Turks & Caicos Islands. These agreements follow the UK’s implementation of disclosure facilities with Crown Dependencies: the Isle of Man, Jersey and Guernsey which includes information exchange agreements.

The G5 tax agreement has been marketed as the latest effort by European jurisdictions to tackle tax evasion. The terms of the agreement provide that banks within the four other countries are required to reveal financial details of UK taxpayers to the UK to enable HMRC to check for related tax evasion. The finance directors of the undersigning countries, including UK Chancellor, George Osborne, said that the pilot agreement, which is intended to include other European jurisdictions in future, “will not only help in catching and deterring tax evaders, but it will also provide a template as to the wider multicultural agreement we hope to see in due course…”

As recently as May 9^th it was announced that HMRC, the Australian Tax Office and the IRS tax administrations plan to share tax information involving trusts and companies holding assets on behalf of UK residents in various worldwide jurisdictions including Singapore, the British Virgin Islands, Cayman Islands and the Cook Islands. It is understood that the data contains both the identities of the underlying individual owners of trusts and companies, as well as the advisors who assisted in establishing the related structures. Further the intention is that the information is also to be shared with other tax administrations if and when requested. The stated aim of this multilateral cooperation and coordinated effort is to enable the efficient processing of related information with a view to penalizing any tax non-compliance by UK residents.

HMRC’s recent “proactive” endeavors in the their fight against offshore tax avoidance, together with the earlier Liechtenstein Disclosure Facility (LDF) and the UK Swiss Agreement mean that for UK taxpayers with undisclosed offshore accounts the HMRC’s anti-avoidance net is ever closing. The most immediate consideration for taxpayers is the effect of the fast approaching 31st May 2013 deadline for the implementation by Swiss banks of the terms of the UK Swiss Agreement where affected assets remain undisclosed to HMRC. There are various options to disclosure of Swiss assets and, for that matter, undisclosed offshore assets in other jurisdictions.

Regardless, of the jurisdiction our view is that now is the time for UK taxpayers to act in order to avoid the potentially adverse consequences of the increasing number of HMRC exchange of information agreements. However, the vital question is which disclosure path to take and a discussion of the terms of each of the current options are explained in our blogs below:

• Liechtenstein Disclosure Facility
• Isle of Man Disclosure Facility (including Jersey and Guernsey Disclosure Facilities)
• UK Swiss Agreement

It is our view that currently the LDF still remains the most beneficial path to compliance due to its guaranteed immunity from prosecution, the potential use of a composite rate option (covering all related income tax, capital gains tax and inheritance tax) and the finality afforded by the eventual disclosure settlement.

Anyone affected by the potential consequences of any of the current information agreements and HMRC’s activities against non-compliance should seek professional advice and consider the appropriate disclosure path as failure to do so may lead to significant penalties and possible criminal prosecution by HMRC.

To discuss any specifics or for further discussion, please contact our UK tax team: Jason Gyamerah (Zurich) or Sara Shahran (London).