Guernsey agrees to "mini-FATCA" disclosure arrangement with UK

Following the Isle of Man’s agreement to implement a “mini-FATCA” tax disclosure agreement with the UK, it seems that Guernsey has decided to follow suit.

The UK has been seeking to implement automatic disclosure agreements with 3 key Crown Dependencies, Guernsey, Jersey and the Isle of Man, since last October as a quid pro quo for consenting to the Crown Dependencies signing an Intergovernmental Agreement (IGA) with the USA designed to simplify the reporting requirements for the US FATCA.  It is a moot point whether the UK has the power to block the Crown Dependencies signing the US IGA without the consent of the UK, but both sides have been trying to find a mutually acceptable solution without major conflict as there is an acceptance that in the current financial and political climate, the Islands need to be seen to be doing all they can to ensure that their beneficial tax arrangements are not being abused for tax evasion.

The key concern of the Crown Dependencies is that the UK choosing to impose reporting requirements only on the Crown Dependencies and not on other financial centres, will put them at a competitive disadvantage because of the costs of compliance, which will in turn lead to a loss of business. 

The Isle of Man was the first to agree to the UK’s demands for automatic disclosure, with Guernsey and Jersey taking the opportunity to try to secure some clarifications and benefits before committing themselves.  Guernsey’s agreement now leaves Jersey as the only jurisdiction yet to confirm its position.

It seems that Guernsey has indeed managed to secure changes to some of the aspects of the mini-FATCA arrangements which were causing the greatest concern.  In particular, the UK agreement will include alternative reporting arrangements for non-domiciled UK tax residents (non-doms) and a commitment  to negotiate a revised Double Taxation Agreement between the two countries.

The proposed arrangements between the UK and Guernsey are subject to the approval of the States of Guernsey later this year, but seem to be likely to be approved.

Guernsey's chief minister Peter Harwood, said: “The agreement that we are working towards with the UK will be consistent with our belief that Guernsey's long-term sustainable economic future is best served by safeguarding our position and reputation as a respected, well regulated, tax transparent jurisdiction. With such a UK agreement, automatic exchange under the EU Savings Directive and importantly an IGA arrangement with the US for FATCA now almost concluded, we believe Guernsey business will have both certainty and a competitive advantage.