Offshore Banking and the British Offshore Financial Centres Review

In his pre-budget report the Chancellor announced a review of British offshore financial centres – what is the significance of this?

In his pre-budget report, the Chancellor of the Exchequer not only adjusted taxes in an attempt to kick start the economy, he hinted at tax increases for higher earners and touched on a review that will follow of all British offshore financial centres.

Few media commentators have touched on the announcement of a review, preferring of course to look at the immediate tax changes that will have the most obvious impact on the majority of people.

However, we feel it’s important to mention offshore banking and the British offshore financial centres review, because although you may not realise it now, it could just be that this is the British way of aligning itself more with Europe, and Germany in particular, and forcing taxation disclosure obligations between jurisdictions.

The British offshore financial review is not only likely to cover the most obvious jurisdictions such as the Isle of Man, Jersey and Guernsey, but all dependencies and territories such as the British Virgin Islands, the Cayman Islands and Bermuda where the British government may ultimately have some degree of responsibility over the savings, investments and banking deposits of British citizens.

In part therefore, the review can be seen as the British government being responsible and looking after Britons who bank offshore, however, you could look at it another way!  Perhaps the government wants to make sure that it has the right level of regulation and investor protection in place in these jurisdictions – but perhaps it is also more interested in securing inter-jurisdiction compliance and reporting.

A spokesperson from the Chartered Certified Accountants speaking to the BBC stated that in his opinion, the review will be about creating transparency between the jurisdictions’ activities, but: “along with the transparency will come a greater flow of information about all things to do with tax.” This ties in well with the fact that HM Revenue and Customs is again targeting international financial institutions with a presence in the UK in their search for Britons attempting to evade tax.

The review of the British offshore financial centres will therefore likely ensure a greater, freer flow of information between the offshore banking jurisdictions and the ‘motherland,’ and ensure that Britain is inline with the general sentiment in Europe and the US too for that matter.  I.e., free flow of all information relating to the taxation obligations of account holders and investors – and ultimately transparency.

What this may mean for the future competitiveness and attraction of these offshore jurisdictions remains to be seen – but we just wanted to raise your awareness of the existence of this review and to advise that we will keep you informed of any significant developments.