In a further bid to clamp down on tax evasion through holding funds offshore, the UK has entered into agreements with many other countries (around 100 so far) that will result in the Automatic Exchange of Information between these countries. The agreements will take affect over the next few years but the first, with the Crown Dependencies (Isle of Man, Guernsey and Jersey) and the British Overseas Territories (Cayman Islands, British Virgin Islands, Bermuda, Anguilla, Turks and Caicos, Monserrat and Gibraltar) will take effect from 1 October 2016.
It has been the case for some time that UK banks and building societies automatically inform HMRC of interest paid on their accounts. Put simply, with the new Automatic Exchange of Information agreements, this is extended so that when HMRC receives such information in respect of a person not resident in the UK, they will pass that information on to the tax authority of the country in which that individual is resident. The reverse will then happen too – under this new regime if a UK resident has a bank account in (say) Switzerland, the Swiss Tax authorities will automatically pass interest details directly to HMRC.
For most people this will have no effect, as the majority report all worldwide income to HMRC already. HMRC have, however, now announced that from 5 September 2016 a Worldwide Disclosure Facility (which replaces previous country specific agreements) is to be set up which is designed to allow those with outstanding tax to pay the opportunity to put their affairs in order. This scheme gives no special terms or lower fines if disclosure is now made but HMRC have said that penalties for non disclosure are likely to be increased in the future.
The type of financial institution covered by this regime is wider than just banks and building societies; some insurance companies, investment companies, trusts and also charities could be included. If these issues could be of concern to you or you require further information then please contact a member of our tax team.