HMRC Global Tax Initiatives are as Aggressive and Widespread as those of the IRS
Very much in the same manner that the IRS is signing information sharing agreements with other countries in regard US Citizens with foreign bank accounts and vice-verse, the UK’s HMRC has reached out to other European Countries to get access to the same information on its expat citizens in its own effort to combat international tax evasion. France, Germany, Italy, Spain, and the United Kingdom have entered into what is being called a G5 Tax Agreement (hence, 5 governments) through which information about each country’s citizens with foreign accounts will be shared with each citizen’s home country.
It’s also been reported that HMRC has initiated several discussions with a wide variety of offshore British Territories and has implemented a series of disclosure facilities throughout Crown Dependencies including Guernsey, Isle of Man, and Jersey.
Developments Outside of the UK and European Territories
The American IRS and the Australian Tax Office agreed this month (May, 2013) to begin sharing information with HMRC regarding foreign companies, corporations, partnerships, and trusts in which assets are being held on behalf of UK Residents. Territories in which information will be shared are not limited to Australia and the United States; foreign companies and trusts in the British Virgin Islands, the Cayman Islands, the Cook Islands, and Singapore will all be subject to these new information sharing guidelines.
What These Global Information Sharing Agreements Mean for UK and other European Residents
Each country has its own laws and regulations stipulating financial penalties for not filing or reporting required information. One of the standard penalties in high dollar cases is that of criminal prosecution. Although it’s been getting more difficult in recent years, it’s still been fairly easy to hide income and assets from your home country that taxes your worldwide income. The chapter on easily hiding assets in offshore accounts, however, is quickly closing.
Disclosure Initiatives are currently being offered to residents all over the world to report worldwide income and assets voluntarily to avoid paying excessive penalties and spending time in a penitentiary. For example, the United Kingdom has implemented a series of disclosure facilities (in addition to the Liechtenstein Disclosure Facility) throughout Crown Dependencies including Guernsey, Isle of Man, and Jersey through which residents can report previously unreported information and enjoy minimal penalties.
Worldwide residents have a window of opportunity between now and the end of 2013 to ‘come clean’ to their home country’s tax authority before government initiatives take effect and scores of faulty taxpayers are identified across the globe. Even though complete agreements won’t be implemented until 2016 or beyond, sharing of basic information is scheduled to begin in 2014.
It’s also important to remember that these are only the first steps to a much grander pursuit of global transparency. By the time agreements recently initiated by the UK and the US are in full swing, agreements with other countries for which discussions are currently taking place will have been signed and be at least in the stage of initial implementation.
The Absolute Bottom Line
The bottom line is that you have 2 options: Get current on the tax obligations imposed onto you by your home country now or pay the most punitive consequences possible in the next year or so. If you want to acquire citizenship in another country and renounce the citizenship of your home country, that may be an option – but not until you’ve satisfied your tax liability.