Facing up to FATCA - reporting to the US
We now live in times where governments exchange information on the sources of income held in each country with a view to eliminating international tax avoidance. This means that even if you are not an international tax avoider, the latest reporting system can still impact on you. This is because financial institutions, such as banks and fund managers in the UK are obliged to make reports under the rules of FATCA (Foreign Account Tax Compliance Act).
In practical terms these firms may contact you to ask for more detailed proofs of identity particularly if you have or have had any links with the USA. You may be asked to prove you are not a US citizen or resident or green card holder. It is important that you respond to any such requests or you may find that your bank is obliged to withhold taxes or freeze your accounts. This will be a nuisance to unwind at the very best.
As well as the identification of individuals there are rules relating to trusts since due to the way the system operates, trusts with particular investments can meet the definition of financial institutions themselves. We have written to clients to explain the action needed for each trust. Where the trust has a corporate trustee, such as Mercer & Hole Trustees Limited, there is no problem since the corporate trustee will undertake all the responsibilities. Where there are individuals as trustees you may find that your fund manager can assume the FATCA filing obligations but not all firms are able to offer this service so trustees will be wise to check. If you cannot use either of these options the trust itself must be registered as a financial institution and will have to make a report to HMRC in May 2015. The deadline for registration is 1 January 2015 which means trustees in this position need to act with some urgency.
Date: 4th December, 2014
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