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Government agreement on Automatic Exchange of Information

The UK Government has signed an agreement with the Isle of Man for the Automatic Exchange of Information, as part of its continuing actions to tackle tax evasion and avoidance by individuals.

The agreement was published on 14 October together with selected draft guidance.

This is the first agreement of this type to be signed that does not involve the United States. As the UK Government has formally announced its commitment to be part of a multilateral automatic exchange of a wide range of financial information about individuals, further agreements will be signed in the future.

The Government will publish in full further draft guidance on the UK/Isle of Man Automatic Exchange of Information agreement, along with draft regulations, later this year.

What is changing and why is this agreement different?

Life Companies that have sold, or will be selling products in the future, that have a surrender/cash value or Purchased Life Annuities, will now have to enquire and retain information on the tax residency status of policyholders.

For new policies entered into on or after 1 July 2014, if a policyholder is a resident of the Isle of Man for tax purposes, the life company will be obliged to report certain information about the policy to HMRC. It also appears that life companies will be obliged to do the same for all pre-existing policies held as at 30 June 2014 as well, although the extent to which (and how) it will be done will become clear once the guidance and regulations are published. This is an extension of the reporting requirements under the new US Foreign Account Tax Compliance Act (FATCA) and will bring life insurers into Automatic Exchange of Information reporting who were previously not impacted by FATCA. 

What the ABI is doing

The ABI will continue lobbying to ensure that the rules are clear and keep the administrative burden on insurers to a minimum, particularly relating to pre-existing policies.

Work led by the OECD continues on a global common reporting standard. The ABI will continue to lobby to ensure the outcome, scope and reporting requirements are not too dissimilar from FATCA, with a view to minimising, as far as possible, the compliance burden for life insurers.

Last updated 01/07/2016