Cayman Islands join the fold

Cayman Island Reef
Image by slack12 via Flickr

Our Government and that of the USA are serious about clamping down on the use of overseas tax havens to avoid tax, the latest development involves the Cayman Islands.

Now, it is a little known fact that Graham Davies applied for a job in the Cayman Islands shortly after qualifying as a Chartered Accountant! The job was managing a portfolio of ‘captive’ insurance companies. These allow wealthy companies to pay insurance premiums to their own off shore insurer. This is legal, although HMRC are anxious to see that the premiums are at a ‘market’ rate. (No I didnt get it, if I had, you wouldnt be reading this!)

A new Double Taxation Arrangement (DTA) between the UK and the Cayman Islands was recently signed in London.

The new DTA has been drafted to allow for the avoidance of double taxation and for the exchange of information necessary to prevent fraud. The arrangement will apply to taxpayers who are resident in either the UK, Cayman Islands or both jurisdictions. In the UK the agreement will apply to income tax, corporation tax, capital gains tax (in relation to the exchange of information), inheritance tax and VAT.

The exchange of information provisions meet the OECD standards and it is expected this new DTA will help combat tax avoidance and money laundering involving both countries.

The DTA will take effect once both countries have finalised the legislative procedures needed to give the arrangement the force of law in both countries.

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