Treasury Seals Guernsey Tax Deal
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.
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Guernsey said last year it would aim to negotiate an intergovernmental agreement with the US over Fatca, which requires financial institutions automatically to provide details of their US clients. But any such agreement needs to be guaranteed by the UK under international rules.
Tony Mancini, head of tax at KPMG's Guernsey office, said this had made a Treasury deal essential. "Without a US agreement it would make it very hard for Guernsey to transact with the global financial services world. We had to have the US agreement – so we got to the point of having to have the UK agreement."
The island's authorities said the move to greater transparency will give it an advantage over other non-compliant jurisdictions. Peter Harwood, chief minister, said the agreement would safeguard "our position and reputation as a respected, well regulated, tax transparent jurisdiction".
Guernsey said both the US and UK agreements would be subject to the approval of the states of Guernsey, the island's parliament, later this year.
Individuals already under investigation will not be covered by the so-called "disclosure facility", which offers immunity from prosecution and covers liabilities going back to April 1999.