The plan includes an automatic tax information exchange and setting up a disclosure facility, and forms part of the government’s off-shore anti-evasion strategy which will be published later this year.
The disclosure facility will allow investors with accounts in the Isle of Man to come forward and settle past affairs before financial information starts being automatically reported to HMRC each year.
The disclosure facility will operate from 6 April this year and run until September 2016. Under its terms, liabilities arising from April 1999 must be fully disclosed and there is a guaranteed penalty rate – 10% for returns to be filed before April 2009 and 20% afterwards.
The chancellor George Osborne said, “The government is committed to tackling tax evasion and this agreement will greatly enhance HMRC’s ability to clamp down on those who try to hide their money offshore. I welcome the progress made with the Isle of Man and look forward to working on this new standard in the automatic exchange of tax information.
“Today’s agreement builds on the groundbreaking work we have already carried out – the UK government has signed agreements with the US and Switzerland so far and we are in discussions with Jersey and Guernsey as part of our common commitment to combat tax evasion.”
Jim Muir, director of financial data management experts, AutoRek, said, “There is little doubt that the latest information-sharing agreement between the Isle of Man and HMRC is being driven by the realisation that hard-hitting regulations like FATCA can be costly and difficult. In addition, large financial institutions – including big employers within the Isle of Man - are becoming increasingly aware of the reputational risk associated with regimes that are seen to be aiding and abetting tax evasion.
“It’s also important to remember that there are other economic factors in play with respect to the relationship between the Isle of Man and HMRC including the much publicised changes to the tax sharing agreements a couple of years ago.”
The agreement is part of an international drive to tackle off-shore tax evasion.
In September the UK and US governments teamed up to combat tax evasion, and in October, the Isle of Man joined with Guernsey and Jersey to sign an agreement to prevent tax evasion by US citizens
In July the UK and the governments of France, Germany, Italy, Spain and the US made a statement committing to work together to improve international tax compliance.
The government has said it will make tax transparency a focus of the UK’s G8 presidency.