British citizens using Guernsey to keep their money from the prying eyes of the taxman will have to declare their assets to the Treasury under an agreement designed to combat tax evasion.
The UK government and the crown dependency are poised to conclude a deal under which British holders of Guernsey accounts or trusts will have to report any unpaid tax to the Treasury by September 2016 or face penalties of up to 200 percent.
The Guernsey move, which follows a similar agreement made last month by the Isle of Man, is likely to put pressure on Jersey to follow suit.
Tens of thousands of UK citizens have accounts in Guernsey, where UK-sourced retail and trust deposits amount to around 4.2 billion pounds, including those held by wealthy "non-domiciled" foreigners.
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Under EU agreements, European citizens with Guernsey accounts must already declare interest payments. But the UK deal also requires balances to be disclosed.
One Guernsey-based professional services adviser said: "This is less of a problem for the very wealthy, whose advisers will have factored in the change. But it's much more likely to affect smaller depositors who may have had an account on the island for 20 years or more."
Non-doms, who hold around 2 billion pounds of deposits on the island, will be subject to lighter rules. Their names and addresses will be disclosed from 2016 onwards, as well as their interest or gains. The Treasury confirmed its discussions with Guernsey had reached 'an advanced stage'.
The Treasury has used a US law – the Foreign Account Tax Compliance Act (Fatca) – to crank up pressure on the three crown dependencies of Guernsey, Jersey and the Isle of Man and other British offshore financial centers to disclose more information about UK-sourced assets.