There has been much discussion recently about the Isle Of Man Disclosure Facility (IOMDF) and I thought it may be useful to provide a summary of the details. The IOMDF relates to a tax sharing agreement between HMRC and the Isle of Man (IOM) government. It allows individuals a limited period of time within which they can disclose any tax irregularities relating to holdings in offshore bank accounts held in IOM, with minimal penalties being applied. Below is a brief summary of the Isle of Man Disclosure Facility and some key pointers to be aware of.
What is The Isle of Man Disclosure Facility?
A tax sharing agreement was signed in February 2013 between HMRC and the government of the Isle of Man. The agreement provides an opportunity for UK taxpayers with assets or investments held in the Isle of Man, to bring their UK tax affairs up to date before their details are automatically passed to HMRC by the Isle of Man (IOM) government. Taxpayers have from 6th April 2013 until 30th September 2016 to make use of the Isle of Man Disclosure Facility and the opportunity for voluntary disclosure, in order to avoid what could amount to substantial penalties. There are currently no specific details on how the automatic exchange of information will occur after September 2016, but the agreement is that the IOM financial intermediaries will ensure their UK resident clients are compliant with the tax laws or will stop acting for them.
The IOMDF has been established to allow UK taxpayers with investments in the IOM to ‘come clean’ on any past tax irregularities, with minimal penalties. By agreeing to disclose any holdings under the IOMDF, individuals can take advantage of a number of key benefits:
- If you choose to disclose your holdings, the HMRC will limit the assessment period and will only go back to 1 April 1999. Under normal circumstances, they can go back up to 20 years.
- Penalties are restricted to 10% on underpaid liabilities up to 2007/08, and 20% for 2008/09 and onwards. This is greatly reduced from what the HMRC would generally apply, as they will normally seek between 30 – 100% in penalties.
- No penalties will be applied if it can be shown that reasonable care has been taken.
- Individuals will have a single point of contact at HMRC to assist with the disclosure.
What are the risks?
If you have investments and choose not to disclose the information, you could face investigation (including possible criminal investigation) and significant penalties once the HMRC receives the details.
Who is eligible?
The list of qualifying criteria is fairly lengthy, but in brief the following individuals may disclose holdings via the IOMDF:
- Individuals who have been resident in the UK between 6 April 1999 and 31 December 2013. Companies may make use of the facility too, however the applicable period differs slightly.
- The individual must have an account with an IOM bank or financial institution. This is referred to as a beneficial interest in “relevant property” and also includes an annuity or cash value insurance contract issued from IOM.
- The individual must not be part of an ongoing HMRC investigation.
- The individual should not have participated in any previous disclosure facility.
For full details of the eligibility criteria, please refer to the HMRC website.
If you have investments held in the Isle of Man, we can provide you with detailed tax advice to guide you through the Isle of Man Disclosure Facility process. To make a disclosure under the IOMDF, you will need to do the following:
- Confirm that you meet the eligibility criteria and ensure your circumstances meet all the conditions for using the IOMDF.
- Complete and return a disclosure pack to HMRC.
- Make a payment amounting to the total tax liability of your disclosure within 30 days of your application.
However, before you progress with the above, we would be happy to meet with you to discuss your options and review all alternates available. We can assess your individual circumstances and advise on the best course of action, as an alternate facility such as the Liechtenstein Disclosure Facility, may prove to be a better option for you.
Please contact us for more information and advice on The Isle of Man Disclosure Facility on 020 8780 2349.
This blog is a general summary. It should not replace professional advice tailored to your specific circumstances.