The UK and Isle of Man are exploring how to incorporate a tax avoiders ‘disclosure facility’ into their own version of America’s Foreign Account Tax Compliance (Fatca) Act.
Like the American rules, the UK and Isle of Man’s version of Fatca will allow for the sharing of information across borders, essentially bringing a curtain down on client tax anonymity across Britain’s dependencies.
John Spellman, Isle of Man director of financial services, told Wealth Manager: ‘The UK Fatca agreement is currently being formalised but this is expected in weeks rather than months. In addition to this we are also exploring a mechanism to address arrears where there will be no limit to the amount.’
Spellman said the UK already has a number of regimes in place to support individuals in arrears with their tax, though the Isle of Man is keen to come up with a ‘simpler’ framework.
On Tuesday, Isle of Man ministers confirmed that arrangements with the UK were likely to include a ‘disclosure facility’. In practice, it will allow individuals either deliberately or inadvertently in arrears to speak to HM Revenue & Customs (HMRC) and discuss paying their tax, plus interest.
Malcolm Couch, Isle of Man assessor of income tax, said these discussions would immediately make individuals aware of the size of their bill, whether they would face a penalty, and over what period their arrears must be cleared.
He added that while it is an ‘HMRC facility’, with the UK taxman dealing with the scheme operationally, the Isle of Man would ensure individuals were aware it existed.
According to an initial draft, the disclosure facility is expected to kick in at the beginning of the 2013/14 tax year and run until September 2016.
While the facility will not be open to individuals already under investigation, it will cover liabilities dating back to April 1999, and there will be a guaranteed 10% penalty rate for returns to be filed before April 2009 and 20% thereafter. These penalties could be significantly higher, however, where HMRC has used information made available under the new sharing agreements.