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Memorandum of Understanding between HMRC and the Isle of Man

HMRC signed an agreement referred to as a Memorandum of Understanding with the Isle of Man which will establish a new disclosure facility intended to allow investors with accounts in the Isle of Man to come forward and settle outstanding tax liabilities.

Under the terms of the agreement, HMRC will, from 6 April 2013 until 30 September 2016 make a disclosure facility available (which will include a bespoke scheme) to persons eligible to participate. Details of eligibility for the scheme are contained at Schedule 2 to the agreement. Broadly, an individual will be eligible to participate if the person is a ‘relevant person’ who was not the subject of a HMRC investigation on 6 April 2013 that was not concluded by that day.

A ‘relevant person’ means a person who, in the period commencing on 6 April 1999 and ending on 31 December 2013 has had a beneficial interest in relevant property and has been resident in the UK for tax purposes for any part of that period. Relevant property is widely drawn and includes any accounts held with a bank or other financial institution in the Isle of Man (more details are available at Schedule 1 to the Memorandum).

Athough the specific terms of the disclosure have yet to be published, key points from the agreement are as follows:

  • the facility will be open to any taxpayer not already under investigation who has an asset in the Isle of Man between April 2009 and December 2013 (Schedule 1 and Schedule 2);
  • a ‘bespoke service’ under which professional advisers can discuss potential cases on an anonymous basis will be available (Schedule 2 paragraph 10);
  • liabilities arising from Isle of Man relevant property prior to April 1999 will not be taxable nor will penalties be sought for those periods (Schedule 2 paragraph 7);
  • penalties for after 1 April 2009 will fall between 10% and 40% (Schedule 2 paragraph 7);

The agreement also provides that the Isle of Man Government will require financial intermediaries in the region to contact their clients known to be relevant persons so that they are made aware of the disclosure facility before 31 December 2013 and again contacted during its final six months.

The agreement paves the way for a wide range of financial information relating to UK persons to be passed automatically to HMRC and for the creation of a Disclosure Facility specific to the Isle of Man which will run alongside the existing Liechtenstein Disclosure Facility.