British offshore tax havens are being pushed into new tax transparency regimes. First on the line, Guernsey, is about to sign a new deal which will reveal the accounts of all UK taxpayers to HM Revenue and Customs (HMRC). Others such as the rest of the Channel Islands, the Isle of Man are soon to follow and even the Cayman Islands.
An estimated £4 billion in accounts on the Channel Islands (a total likely to be even higher in the Cayman Islands) are due to be brought into a new tax transparency regime that will require assets controlled by British taxpayers to be reported to the HMRC.
These new tax agreements directly follow the publication of America’s Foreign Account Tax Compliance Act (FATCA) which is aimed at revealing the financial accounts of all the US taxpayers living and working around the world.
Dubbed ‘Son of FATCA’, this HMRC deal is the first FATCA type transparency regime to be implemented outside the U.S. All account holders with British taxpayer status or those considered to be ‘non-domiciled’ will have to comply. It has been estimated that almost half of the £4 billion held in these accounts will be of British origin.
Unlike FATCA, this will not be an extra-territorial regime as Guernsey, the Channel Islands and Isle of Man are not separate countries. However, many of the challenges faced by firms in the implementation of FATCA will be represented here. New means to identify and validate those accounts with ‘British Indicia’, report or withhold are very likely to be needed.
What the exact rules will look like, or when they will be released are still unknown. The reporting requirements for non-domiciled individuals will be published “in due course” and a consultation will be issued to the industry for comment.
The industry will have to wait and see just how aligned these rules will be with the FATCA regime and whether they can be implemented in a similar time-frame.
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