Offshore Disclosure update – the dominoes continue to topple

Hot on the heels of an announcement from HMRC that a “Memorandum of Understanding” had been agreed with the government of the Isle of Man, it has now been revealed that a deal with Guernsey is also close to being finalised. Discussions with Jersey (presumably with a similar outcome in mind) are ongoing

The Memorandum agreed with the Isle of Man is concerned primarily with the terms of a new disclosure facility (see below) but alongside this there is expected to be an agreement on the automatic exchange of information, the final parts of which are still under discussion. The agreement with Guernsey is expected to be very similar, with some form of disclosure facility put in place alongside arrangements for the disclosure of information.

The Isle of Man Disclosure Facility

This new facility – the IoMDF for short – has been announced as a way for those with monies in the Isle of Man to “come forward and settle their past affairs before information on their accounts is automatically shared”.  The facility is expected to start on 6 April this year and run until September 2016. It will not be open to those already under investigation, but for those who are eligible it will provide an opportunity to make a full disclosure in return for the payment of tax, interest and pre-set penalties.

What should I do?

If you are a UK-resident and have undeclared funds in the Isle of Man or Guernsey (or, for that matter, any other offshore jurisdiction) you need to think hard now about whether disclosure to HMRC is your best option and then take advice as to how to go about it. Full details of the Isle of Man and Guernsey deals are not yet available. It is clear that the disclosure facilities have a number of elements in common with the Liechtenstein Disclosure Facility (the LDF) but they don’t appear to be as attractive. In particular, there is no sign that the IoMDF or what will presumably be known as the GDF will guarantee immunity from prosecution. For those who can qualify, therefore, the LDF may still be the best route.

The future

It has been clear for some time that the pragmatic approach demonstrated by the LDF suits a resource-starved HMRC very well. The stick of information disclosure and withholding taxes works well in driving people towards the carrot of a disclosure facility that makes the taxpayer do nearly all of the work. The end result is extra £billions in HMRC’s coffers at minimal cost to them (plus a PR victory in terms of “closing down” tax havens and ongoing tax revenue from the individuals who are brought fully within the system as a result).

The approach taken by the UK government fits in well with the general mood and activity by others (particularly the US’s FATCA rules) and it is likely that the offshore dominoes will continue to topple (with Jersey next on the list).

Why UHY Hacker Young

Having dealt with a significant number of disclosures under the LDF since its introduction in 2009, we have established both a good working relationship with HMRC and the internal processes needed to ensure that your disclosure is dealt with quickly and with the best outcome. If you would like to talk about your situation – whether it relates to assets in the Isle of Man, Guernsey or any other jurisdiction – you are welcome to do so initially on an anonymous basis.

If you are unsure about making a disclosure, bear in mind that the options for moving your money are running out and that the trail you leave is likely to be picked up as the exchange of information with HMRC becomes the norm. Information disclosure will extend to trusts as well as individuals so the scope for concealing funds through complex structures will be severely limited.