Your tax affairs under even greater scrutiny
Manx residents are being warned that new global standards on tax co-operation will put their financial affairs under greater scrutiny.
Letters have been sent out by the Treasury to a number of taxpayers highlighting apparent discrepancies in their taxable income.
This follows information passed on to the Income Tax Division under the European Union Savings Directive (EUSD).
The letter reads: ‘We have compared this information with the details declared on your income tax returns and have been unable to reconcile them.
‘Would you please therefore review your declarations for all relevant years? Please be aware, penalty and or interest may be charged on the amount of tax lost.’
One recipient of this letter criticised the tone of the letter and pointed out the income he received from National Savings Certificates and Premium Bonds is tax exempt.
‘I hope no-one with a heart problem got one of the nasty letters,’ he said.
Sheila Lowe, the newly-appointed chief financial officer at the Treasury, insisted the letters were routine.
And she said that new international standards of tax co-operation will mean the Manx authorities will be receiving more detailed information from many more countries over the next few years about the worldwide income of island residents.
She said: ‘The division has an obligation if tax is due, to highlight at the earliest possible opportunity that a penalty and interest may be applied, though we are sorry if anyone is unduly alarmed by this warning.
‘Most Manx residents correctly declare their income and pay their tax, and it is only fair that we do our best to make sure that everybody else does the same.
‘We have a public duty to follow up on any credible indication that taxable income may not have been declared. We cannot turn a blind eye to potential revenue that could help to fund the public services of the Isle of Man.’
She explained that the Income Tax Division receives information from a variety of sources and where there is a significant discrepancy with what has been declared on a tax return, Treasury will begin inquiries on a case by case basis after checking files first to see if there is any obvious explanation.
Ms Howe said the EUSD report does not give the precise nature of the income only the total – and so the only way to find out if the income reported is, for example, interest on a savings account which is taxable here or a premium bond prize which is not, is to write to the individual concerned.
And she added: ‘The Isle of Man has been at the forefront of developments in transparency and tax information exchange.
‘These developments will in the near future see the range of information received by the Income Tax Division expanded to include United States data, under the terms of their FATCA laws, and data from a significant number of other countries, under the terms of what has become known as the Common Reporting Standard.
‘Island residents are liable for Manx tax on their income worldwide, and the public should be aware that under international tax co-operation agreements the Manx authorities can receive information as well as providing it.
‘In the next few years implementation of new international standards means that the Income Tax Division will be receiving more detailed information from many more countries.’
