The UK has signed an automatic tax information sharing agreement with the Cayman Islands as part of efforts to tackle tax evasion and to help British authorities improve tax collection.

The agreement orders the automatic transfer of account information belonging to any British citizen living in the Cayman Islands to the UK.

As per the agreement, information held by the Cayman Islands will automatically be transferred to officials at HM Revenue and Customs (HMRC), which will use it to collect the tax that is due.

The Cayman Islands has also agreed to become part of the G5 multi-lateral information sharing pilot to automatically exchange information about bank accounts held by taxpayers from their jurisdictions.

The Cayman Islands and other British overseas territories have become major international financial centres to low taxation, light-touch regulation and limited requirements for those who invest there to disclose their business.

George Osborne, the UK’s Chancellor of the Exchequer, said: "Alongside the significant investment that the government has made in HMRC’s anti-avoidance and evasion work, these agreements will help them to clamp down further on those individuals who seek to hide their assets offshore."