GEORGE TOWN, Cayman Islands — UK taxpayers with undeclared income and capital gains held in the Cayman Islands must provide this information “within 30 days” or face “detailed investigation”, according to letters sent out by the British tax authorities.

Cayman Islands banks will soon begin providing information to Britain about accountholders that are UK taxpayers ahead of the coming into force of the recently-signed automatic information exchange agreement between the two jurisdictions. The agreement, which is one of several that the UK has signed with crown dependencies and British overseas territories, comes into force in 2016 for information in respect of the calendar years 2014 and 2015.

“Anyone with undeclared assets in the Cayman Islands who was thinking that they could put off sorting out their affairs until 2016 will have a rude awakening if they receive one of these letters,” said tax expert Reg Day of Pinsent Masons.

British tax authorities have been provided with £994 million (US$1.65 billion) of additional funding and these letters show they have been gearing up resources, data handling and software capabilities to identify targets for criminal and civil investigations, which would cover the last 20 years.

In November, the Cayman Islands became the first of the overseas territories to formalise an automatic information exchange agreement with the UK. The territory has also formally agreed to be part of the G5 multi-lateral information sharing pilot, under which a growing number of countries led by the UK, France, Germany, Italy and Spain will automatically exchange information about bank accounts held by taxpayers from their jurisdictions.

The inter-governmental agreement between the UK and Cayman Islands is an example of ‘UK FATCA’, which is modelled on the agreement that the UK has entered into with the US under its Foreign Account Tax Compliance Act (FATCA). FATCA is designed to prevent tax evasion by US citizens using offshore banking facilities, and introduces reporting requirements for foreign financial institutions with respect to accounts held by US residents.

Under UK FATCA-style agreements, financial institutions in participating territories will have to provide information to their local tax authorities about accounts held overseas by UK residents. This information will then be provided to Britain under the exchange of information agreements.

The UK government announced last May that all overseas territories and crown dependencies with significant financial centres had committed to the introduction of information-sharing arrangements. The other participating overseas territories are Anguilla, Bermuda, the British Virgin Islands, Gibraltar, Montserrat and the Turks and Caicos Islands. Agreements with the overseas territories are not reciprocal, meaning that information will only flow from the overseas territory to the UK. The agreements with the crown dependencies — Jersey, Guernsey and the Isle of Man — allow for a two-way exchange of information.cayman-islands-accounts-within-30-days#sthash.VIYQUHFV.dpuf