The United Kingdom government plans changes to its tax laws that could deal a major blow to offshore financial services centres like the Virgin Islands, two news organisations have reported.
Citing a “draft agreement” that hasn’t been made public, the industry magazine International Tax Review and The Guardian newspaper reported last week that UK officials plan to introduce legislation similar to the United States’ Foreign Accounts Tax Compliance Act.
The proposed law would require financial institutions in UK overseas territories and Crown dependencies to automatically share information about UK citizens and corporations with the country’s tax authorities, according to the reports.
FATCA, the US law upon which the legislation was reportedly modeled, was passed in 2009 and is expected to partially come into force beginning in 2014. It will require non-US financial institutions such as banks and trust companies to determine which of their clients with accounts containing more than $50,000 have ties to the US.
Under FATCA, the institutions will have to disclose that information to US tax authorities or be deemed “non-compliant” and face a 30 percent withholding penalty.
The proposed UK legislation contains similar provisions, according to the International Tax Review, which reported that the proposal would require institutions to automatically exchange information about accounts with UK authorities.
See the Nov. 29, 2012 edition for full coverage.
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