Contractors' Questions: Who's the Isle of Man disclosure facility open to?
Contractor’s Question: What will the Isle of Man disclosure facility mean in practice, including in terms of penalties and prosecutions, and who’s it open to?
Expert’s Answer: The disclosure facility will operate from April 6 2013 and run until September 2016. Under its terms, all undeclared 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% thereafter. The undeclared liabilities will include not only those relevant to the Isle of Man investments, but all other such matters, wherever they arise.
Years prior to April 6 1999, as long as a full disclosure is made and accepted under this facility, will not be pursued by HMRC in the future.
Those eligible to participate (individuals and companies, trusts etc) in the facility must have a beneficial interest in a bank account, annuity, trust, company or partnership in the Isle of Man and have been UK resident for tax purposes at some point between April 6 1999 and December 31 2013.
Participation requires the filing of a disclosure report detailing the liabilities and background to the disclosure, along with the usual personal details (name, address and tax reference). Payment should be made with the disclosure – however as long as suitable explanations and details of a proposed payment plan are made HMRC will, if the circumstances are acceptable, agree a time-to-pay plan.
Where HMRC uses the information made available under the information sharing agreement, it will be seeking significantly higher penalties.
The agreement specifically excludes participation by those who are ‘Relevant Persons’ for the purposes of the recently launched UK-Swiss Agreement. This will, for example, include individuals with a Swiss bank account as well as an account in the Isle of Man.
Unlike the Liechtenstein Disclosure Facility (LDF) there is no guarantee against criminal investigation for tax related offences; HMRC’s published criminal investigation policy will apply and the facility will not be available to those currently under enquiry by HMRC.
Furthermore those who have previously been under investigation will not be able to benefit from the guaranteed penalty rates or start date. It is worth noting that apart from criminal and tax fraud investigations, individuals under any other type of HMRC enquiry can participate in the LDF assuming they meet the other eligibility requirements.
The Composite Rate Option, which can make the LDF so attractive in many cases, is also not available under the Isle of Man facility.
Like the LDF, HMRC will provide a bespoke service so that discussions on a ‘no names’ basis will be allowed with dedicated HMRC investigators prior to participating. Residency and domicile matters can be discussed and agreed with a single point of contact as part of the process. Estimates and other matters which are not clear cut can also be discussed and as appropriate agreed with HMRC prior to any disclosure being filed. HMRC will aim to settle any disclosures within nine months of submission.
Anyone with offshore tax matters which are not compliant – or were not compliant in the last 20 years - needs to sit down with a specialist in tax investigations and talk through the benefits of putting things right via the LDF or, if appropriate, the Isle of Man facility.
Delays in taking action could potentially lead to an expensive tax demand from HMRC. As HMRC stated in respect of the Isle of Man statement: ‘Where HMRC uses the information made available under the information sharing agreement, it will be seeking significantly higher penalties’.
The expert was Andrew McKenna, of chartered accountancy firm Smith & Williamson.