UK: Jersey Guernsey And Isle Of Man Disclosure Facilities And FATCA Style Agreements Announced

Last Updated: 8 October 2013
Article by Ian Perrett

The announcement demonstrates the UK government's commitment to its 'no safe havens' strategy and follows on from the success of the Liechtenstein disclosure facility ('LDF') (which has to date seen around 5,000 UK taxpayers regularising their tax affairs), as well as Tax Information Exchange Agreements ('TIEAs'), put in place between the UK government and the governments of Jersey and Guernsey back in 2009 and more recently with the Isle of Man. The trend has continued in recent weeks with the announcement that UK–FATCA style agreements are to be put in place between the UK and the Crown Dependencies.

The Facilities

The Facilities, all of which are based on identical Memoranda of Understanding, closely follow the terms of the LDF. The Facilities may be used by a taxpayer to deal with previously undisclosed tax liabilities in relation to assets anywhere in the world. Unpaid liabilities are assessed from 6 April 1999 (rather than the usual 20–year period) and reduced penalties will apply. HMRC will also provide professional firms with a bespoke service similar to that which is available under the LDF, and HMRC will permit initial discussions to be carried out on an anonymous basis.

However, there are also a number of differences between the Facilities and the LDF, which may make them more attractive to some taxpayers than others. A potentially significant advantage of the Facilities is that a taxpayer does not need to have held an offshore asset as at 1 September 2009 in order to make a disclosure. In addition, although the taxpayer needs to establish a financial 'footprint' in the relevant jurisdiction in order to take part in the Facilities, there is no minimum asset requirement (under the LDF, the taxpayer must transfer 20% of the value of his undisclosed assets in order to take part in the facility).

Although it may be easier to take part in one of the Facilities, there are a number of reasons why the LDF may still be the more favourable option. Unlike the LDF, the Facilities do not provide automatic immunity from criminal prosecution for individuals making a disclosure. Furthermore, the Facilities do not allow taxpayers to elect to be taxed under a Composite Rate Option, which will prevent them from, for example, being able to clear past inheritance tax liabilities in an advantageous manner.

A further disadvantage is that individuals making a disclosure under the Facilities must make a payment on account of tax within 30 days of registration. In practical terms, this is likely to mean that a lot more pre–registration works needs to be completed. The disclosure must also be made within 6 months of registration, as opposed to a maximum of 10 months under the LDF.

A final significant difference between the Facilities and the LDF is that the favourable terms of the Facilities are not available to anyone who was classified as a 'relevant person' under the UK/Swiss Agreement. In practical terms, this will make the Facilities unattractive to individuals who have previously held accounts in Switzerland.

UK–FATCA style arrangements

In addition to the Facilities, the UK government has also recently announced that it will be putting in place FATCA style arrangements with the Crown Dependencies and the UK. The arrangements will lead to the automatic exchange of information concerning relevant accounts between the governments of the Crown Dependencies and the UK. The arrangements are expected to closely follow the US model, although there are likely to be alternative reporting regimes for UK resident non–domiciliaries.

Tax Information Exchange Agreements (TIEAs)

The Facilities and the FATCA style arrangements will complement the TIEAs that have existed between the UK and the governments of the Isle of Man, Jersey and Guernsey since 2009.

The TIEAs are broadly similar and require the relevant authorities to provide HMRC with information that is foreseeably relevant to UK income tax, capital gains tax, inheritance tax, corporation tax and, in the cases of Jersey and Guernsey, VAT. 'Information' is defined very broadly and includes 'any fact, statement, document or record in any form'.

The obligation to exchange information is not restricted to information already in the possession of the relevant tax authority, which must also use its domestic information gathering powers to obtain requested information, even if it does not need the information for its own purposes.


It remains to be seen how popular the Facilities will prove to be. However, developments in the area of exchange of information are indicative of HMRC's continuing drive against offshore tax evasion.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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