As part of their open commitments to being well-regulated, co-operative and transparent international financial centres, the Governments of Jersey and Guernsey both announced in March 2013 that they intend to agree intergovernmental agreements ("IGAs") with the UK for the automatic exchange of tax-related information. Such a move was anticipated following the earlier IGA announced between the UK and the Isle of Man; the Cayman Islands have since agreed to follow suit and it is expected that other British Overseas Territories will fall into line shortly.

This follows the earlier announcements by the Governments of Jersey and Guernsey of their intentions to enter into IGAs with the United States in connection with FATCA. The reporting obligations on financial institutions under the US and the UK IGAs are expected to be similar though the reporting requirements under the UK IGAs will distinguish between UK residents who are and are not UK domiciled. A consistent approach should assist financial institutions in Jersey and Guernsey to comply with and set up systems to effect the required exchanges of information.

Linked to the UK IGA is a disclosure facility designed to give an opportunity for individuals with investments in Guernsey or Jersey to make a voluntary disclosure of any undeclared tax liabilities before they are challenged by HMRC. This facility is available until 30 September 2016 to UK resident persons who for any part of the period between 6 April 1999 and 31 December 2013 have had a beneficial interest in 'relevant property' (which covers a wide variety of assets or interests either held in or administered from Jersey or Guernsey, ranging from a single bank account to complex trust structures). Although the terms are similar to the Liechtenstein Disclosure Facility (the "LDF") there are some differences and in particular no guaranteed immunity from prosecution and only a requirement to have had a beneficial interest in relevant property in Jersey or Guernsey on or before 31 December 2013.

Guernsey's Treasury and Resources Minister, Gavin St Pier, described the IGA as "a step forward not a leap forward" since Guernsey has exchanged automatically for over two years under the EU Savings Directive. The IGAs have similarly been welcomed in Jersey.

Guernsey in the top TIEA

On 11 April 2013, the Global Forum on Transparency and Exchange of Information for Tax Purposes published its Peer Review Report - Phase 2 into Guernsey. The report notes that Guernsey has been exchanging information in accordance with international standards since 2007 and has developed cooperative relationships with the competent authorities which gives rise to efficient exchanges of information. Both Jersey and Guernsey have actively sought and agreed Tax Information Exchange Agreements ("TIEAs") and Double Tax Agreements ("DTAs") with other jurisdictions and in particular OECD, EU and G20 member countries.

The report provides an analysis of the requests received by Guernsey during the years 2009, 2010 and 2011 from its TIEA partners. In total only 32 requests were received during this period from 8 different jurisdictions; 15 requests were satisfied by information which was publicly available and in respect of 14 requests, Guernsey sought clarification which led to 10 requests being revised and 4 withdrawn (or no further response has yet been received). The number of requests will doubtless increase as more TIEAs come into force and authorities seek to flush out more details following the automatic exchange of information under the IGAs when these come into force.

Sting in the UK Budget

Although the new tax landscape for high value UK residential properties was thought to be settled, there was one unexpected and radical change announced in the recent UK Budget: the way that liabilities can be deducted for the purposes of UK inheritance tax.

This will have significant impact on persons who are non-resident or non-domiciled in the UK and who own high-value UK residential property and who 'de-enveloped' or are considering 'de-enveloping' the property for the purposes of the ATED (the Annual Tax on Enveloped Dwellings - the new name for the Annual Residential Property Tax). Essentially it appears that the UK government is trying to ensure that UK residential property owners who 'deenvelope' are exposed to UK inheritance tax on the value of the property and those who remain 'enveloped' pay the new ATED and CGT. Persons affected will need to take further advice.

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