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UK and Guernsey set to finalise tax deal

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Guernsey is set to finalise a tax deal with the UK, providing for enhanced reporting of tax information in line with Foreign Account Tax Compliance Act (FATCA) principles; ‘alternative’ reporting arrangements for non-domiciled UK tax residents; and agreement on a disclosure facility. 

Peter Harwood, the crown dependency’s chief minister, said on Friday that the deal would ‘reinforce Guernsey's commitment to tax transparency’.

‘Guernsey is fully committed to combating tax evasion and the principle of automatic exchange and our twin [inter-governmental agreement] approach to US/UK reporting will provide our industry with a very strong platform to compete on the world stage against weaker, less transparent and compliant jurisdictions,’ he said.

The Isle of Man’s chief minister Allan Bell welcomed the announcement. ‘It confirms our view that FATCA is becoming the new global standard and that other jurisdictions will inevitably have to follow the Isle of Man’s lead on this issue,’ he said. The UK and Isle of Man governments announced last December that they will automatically exchange a wide range of information on tax residents.

The Financial Times reported that the UK and Guernsey were ‘poised to conclude a deal under which British holders of Guernsey accounts or trusts will have to report any unpaid tax to the [UK] Treasury by September 2016 or face penalties of up to 200%’.

It added: ‘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 £4.2bn, including those held by wealthy “non-domiciled” foreigners.’

Paul Clarke, tax partner at PKF, said: ‘I’d be surprised if a similar deal with Jersey is not announced shortly. The FATCA has given the UK authorities considerable leverage with former “tax havens” – there are very few places left to tax evaders to hide.’