Bermuda and the UK are to exchange tax information after reaching an arrangement to counter and prevent tax evasion and avoidance by their respective citizens.

The deal was signed in London yesterday, although it is expected to take one year before it comes into effect.

Finance Minister Paula Cox put her name to a new tax information exchange arrangement (TIEA) with the UK at the Overseas Territories Consultative meetings held in London.

The treaty marks the second such agreement that Bermuda has concluded in accordance with its June 2000 commitment to the principles of fair tax competition promoted by the Organization for Economic Cooperation and Development, better known as OECD.

The agreement governs the exchange of information relating to taxes and respects the constitutional relationship between the UK and Bermuda, proposing that both nations have a mutual commitment to undertake any internal legislative formalities to bring the arrangement into force and to notify each other when such formalities are completed.

The new arrangement reads: "The Government of the UK considers that this Arrangement demonstrates Bermuda's commitment to high standards for effective exchange of information with respect to both criminal and civil taxation matters within an acceptable timeline, consistent with the aims and objectives of the OECD Global Forum on Taxation.

"The Government of the UK also recognises the important progress that Bermuda has made in negotiation of TIEAs with other countries and recognises that Bermuda is committed to combating tax abuse by putting in place mechanisms which enhance transparency."

The arrangement will enter into force in 12 months, provided both countries have completed their legislative procedures to give effect to the arrangement.

TIEAs allow governments to enforce their domestic tax laws by exchanging, on request, information relevant to a tax matter covered by the arrangements and this is the first comprehensive one signed by the UK and covers both direct and indirect tax matters.

Previously, the UK has concluded limited agreements providing for the exchange of information in relation to the taxation of income from savings with Jersey, Guernsey, the Isle of Man, Gibraltar, the Cayman Islands, the British Virgin Islands, Anguilla, the Turks & Caicos Islands, Montserrat, the Netherlands Antilles and Aruba.

Bermuda's first agreement concluded in accordance with the commitment to the OECD, was with Australia, when the Australia-Bermuda tax information exchange agreement, signed at the Australian Embassy in Washington DC in November 2005, which came into effect at the end of September this year.

The Ministry's commitment was to adopt further legal mechanisms that allow tax information to be exchanged with other jurisdictions in a more timely and effective manner similar to the 1986 Tax Information Exchange Agreement that Bermuda has with the USA.

With respect to the agreement with the UK, Minister Cox said: "Officials from Bermuda and the United Kingdom met for two rounds of negotiations that began in October 2005 and concluded in July 2007."

Financial Secretary Mr Donald Scott accompanied Finance Minister Cox to London for the Overseas Territories Consultative Council Meetings and for the signing of the agreement.