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Exchange of information/offshore assets

Exchange of information/offshore assets

The drive for international tax transparency by governments and tax authorities across the world continues at an unprecedented pace. Whilst the main reason for this is to combat tax evasion it is important to recognise that all UK residents who hold assets overseas could be impacted by these developments.


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Justine Howard

Senior Manager: Tax

KPMG in the Isle of Man


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exchange of information

There have been moves towards information exchange for some time of course, e.g., EUSTD, FATCA, the UK Switzerland Tax Agreement and the Inter-Governmental Agreements (IGAs) the UK now has with its Crown Dependences and Overseas Territories. The Common Reporting Standard is ground-breaking because of the number of countries (over 90) that have committed to information exchange.

Various tax information agreements will result in HMRC receiving account holder names and addresses, account numbers, year-end account balances and details of payments made into these accounts. As well as personal accounts information on certain accounts held by entities, such as trusts, controlled by UK people will be provided to HMRC. Whilst most agreements remain to be finalised, and more developments are anticipated the story so far is (latest first):

November 2014 - Switzerland became the 52nd jurisdiction to sign up to the Multilateral Competent Authority Agreement, which will allow it to go forward with plans to activate automatic exchange of financial account information in tax matters with other countries beginning in 2018. Switzerland had earlier said that it would implement the Common Reporting Standard. The Swiss decision is subject to Parliamentary approval, as well as the possibility that voters may be asked to approve the necessary laws and agreements.

October 2014 - EU finance ministers take a major step towards ending banking secrecy, agreeing to the automatic exchange of account information. Ministers had to face down early opposition by Luxembourg and Austria to approve a directive requiring banks to swap bank account information with tax authorities in other member countries. Under the new rules, national tax authorities will have the unprecedented power to collect information on all bank accounts and automatically exchange it with other participating countries. "Bank secrecy is dead and automatic exchange of information will be applied in its widest form," said Algirdas Semeta, the EU's taxation commissioner.

August 2014 - HMRC published two consultation documents dealing with (1) A new criminal offence and (2) Strengthening civil deterrents

In the criminal offence consultation it is proposed there should be a new strict liability criminal offence of failing to declare taxable income and gains arising offshore regardless of the intention to evade tax. This will apply to income tax and capital gains tax but not, at this time, to other taxes such as inheritance tax. 

To reflect the “OECD Common Reporting Standard (CRS)” whereby offshore account details for UK persons will be exchanged with the UK on an automatic basis, the consultation sets out that it is the Government’s preference to exempt all income and gains arising in CRS jurisdictions from the new offence.

In the civil deterrents consultation there are several proposals including:

  • Extending the current civil penalty regime to include income and gains that originally arose in the UK but where the proceeds were moved to an offshore account.
  • Introducing an additional surcharge (or possibly extending the 20 year assessment time limit) for those who have deliberately moved assets between different offshore jurisdictions to escape greater tax transparency developments.
  • Introducing a new penalty category for those who hold assets in jurisdictions which do notexchange information with the UK to a penalty rate of more than the current 200%.
  • Extending the current civil penalty regime for offshore non compliance from Income Tax and Capital Gains Tax arising offshore to also include Inheritance Tax where the assets are located offshore.

May 2014 - At the OECD’s annual ministerial meeting in Paris on 6 May 2014, 47 countries endorsed a declaration to automatically exchange tax information, to be implemented by a new single Common Reporting Standard.  The 47 countries include Singapore and Switzerland.  The complete list is Argentina, Australia, Austria, Belgium, Brazil, Canada, China, Chile, Colombia, Costa Rica, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Iceland, India, Indonesia, Ireland, Israel, Italy, Japan, Korea, Latvia, Lithuania, Luxembourg, Malaysia, Mexico, the Netherlands, New Zealand, Norway, Poland, Portugal, Saudi Arabia, Singapore, the Slovak Republic, Slovenia, South Africa, Spain, Sweden, Switzerland, Turkey, United Kingdom and United States.  

April 2014 – The UK government negotiates with the EU regarding the Fourth Money Laundering Directive.  It would force the disclosure of any individual who ‘exercises effective control’ over trust activities. This could include the settlor, any beneficiary or protector of the trust.  As a compromise the UK government intends to restrict the obligations to trusts that hold financial assets – which would exclude for example Will trusts.

April 2014 – HMRC writes to 2,000 taxpayers with overseas bank accounts urging them to come forward if they have undeclared income.  The letters are a result of a sampling exercise using HMRC’s “Connect” system.  They are an attempt to test and refine HMRC’s risk assessment capability, in preparation for the transfer of vast amounts of taxpayer information regarding offshore accounts.  

April 2014 – George Osborne announces plans to give new powers to HMRC to make it easier to prosecute people who evade taxes by hiding money offshore. Currently HMRC must demonstrate that individuals intended to evade tax on foreign income but in future the government wants to be able to bring criminal prosecutions against anyone found to have undeclared foreign income, whether this is due to deliberate actions or not.

HMRC will be in receipt of increasing amounts of information from many countries as a result of international cooperation and transparency. Whilst there are an increasing number of people prosecuted for tax evasion the vast majority of cases continue to be concluded by HMRC for a civil financial settlement. This is expected to continue for those who are coming forward to put matters straight.

The Chancellor said HMRC would consult on strengthening the penalties for offshore tax evasion and seek to improve incentives for whistle-blowers “it is totally unacceptable for people not to pay the tax that is due and the message will be clear now with this new criminal offence that if you’re evading tax offshore, there is no safe haven and we will find you” Mr Osborne said.

January 2014 – The UK completes the final automatic tax information sharing agreement such that all British Overseas Territories have now signed IGAs with the UK.  The British Overseas Territories are Anguilla, Cayman Islands, Bermuda, Montserrat, Turks & Caicos, the British Virgin Islands and Gibraltar.

October 2013 - The UK signs automatic tax information sharing agreements with Jersey, Guernsey and the Isle of Man. The first information to be exchanged (between Jersey, Guernsey and the Isle of Man with the UK) will be on 30 September 2016. This will be in relation to account details for calendar years 2014 and 2015.


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