HM Revenue & Customs (HMRC) and the Isle of Man’s Chief Minister Allan Bell made statements last week concerning the decision to sign a new tax deal allowing the automatic exchange of information on a reciprocal basis.   This will coincide with the signing of the enhanced tax information exchange agreement between the US and the Isle of Man governments to implement FATCA (the US Foreign Accounts Tax Compliance Act) for the overseas accounts of US citizens.

Automatic information exchange is an important tool in boosting HMRC’s ability to clamp down on those who seek to hide their money overseas,” said David Gauke, Exchequer Secretary to the Treasury. “Our ground breaking agreement with the US sets a new standard in international tax transparency and today’s agreement between the UK and Isle of Man to move to much greater levels of automatic exchange is the next step in this process.”

Mr Bell stated to the Isle of Man Tynwald  “…The island’s direct tax regime has faced external pressure for change, in terms of transparency, for over a decade. The nature, extent and focus of pressure has ebbed and flowed throughout that period, but has never left us…Honourable Members, the U.S. FATCA is a game changer in relation to transparency and the automatic exchange of information agenda. It will be used as the lever and model by many countries for equivalent information to be provided to them.   Such is its reach and effect, FATCA may even overtake the proposed changes in the EU Savings Directive. This Government considers, therefore, that automatic exchange of tax information in something like the volume and form required by the USA under FATCA will become part of the international standard.“

Our understanding is that HMRC is also in discussions with the Guernsey and Jersey governments to form agreements on the automatic exchange of information.

UK residents owning bank accounts in offshore jurisdictions should note that HMRC will check the information obtained under these agreements to see whether foreign income and gains have been declared.   Taxpayers with issues should seek professional advice and should consider using the Liechtenstein Disclosure Facility or other possible disclosure avenues before they are approached by HMRC as this may enable them to bring their tax affairs up to date on more favourable terms compared to the normal rules.