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Bearer shares and delays blot UK record on information exchange

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The UK is a ‘very active country’ in the field of exchange of information in tax matters, receiving approximately 1,200 requests a year. But it should either improve mechanisms to identify owners of bearer shares or eliminate such shares, and review the process for issue of information notices, according to a peer review by members of the OECD Global Forum on Transparency and Exchange of Information for Tax Purposes.

The OECD observed that the UK has one of the world's largest networks of exchange of information (EOI) instruments and exchanges ‘a large volume’ of information each year. It has a ‘good legal and regulatory framework for EOI’, based on the law as at June 2011.

However, several peers expressed concerns that ‘it takes too much time to receive information in cases where a formal information notice has to be issued and approved by a Tribunal’, particularly in cases regarding bank information.

‘As a major world economy and with one of the leading financial centres in the world (City of London),  the UK has a long history in negotiating double taxation conventions (DTCs) leading to a network of agreements covering 122 jurisdictions,’ the Global Forum said in a 120-page peer review report on the UK.

‘Further, it has negotiated taxation information exchange agreements with 22 jurisdictions, eight of which are also covered by a DTC. This leads to a network of exchange of information agreements with 136 jurisdictions which includes all of the UK’s main economic and diplomatic partners as well as financial centres.

‘The large majority of these agreements allow the UK to exchange information to the standard. Nevertheless, the UK should continue its program of updating the last of its older agreements. The UK is also able to exchange information under some multilateral mechanisms.’

The Forum noted that the UK’s legal environment ensures ‘in most cases’ that ownership information is maintained for all relevant companies and other entities, but further action should be taken to ‘either ensure that robust mechanisms are in place to identify the owners of bearer shares or amend [UK] legislation to eliminate such shares’.

The UK’s inability to use its information gathering powers for exchange of information purposes where the name of the taxpayer is not known was a ‘noteworthy shortcoming’, the Forum said. HMRC are consulting on a proposed amendment to FA 2008 Sch 36 to bring their information powers into line with the international standard.