The Foreign Account Tax Compliance Act (‘FATCA’) originates from the US, but will soon have a wide impact here in the UK. FATCA was introduced to combat tax evasion by US taxpayers using foreign accounts by imposing a reporting requirement on ‘financial institutions’ outside the US.
From 1st January 2015, all UK resident ‘financial institutions’ must supply information to HMRC for them to pass on to the US Internal Revenue Service.
Many of us may immediately think of banks or investment managers as being financial institutions – but not trusts. However, a large number of UK resident trusts will be ‘financial institutions’ for the purposes of FATCA, whether or not any of its beneficiaries are US taxpayers; and the trustees of those trusts will have FATCA registration and reporting requirements, which they must comply with quickly. Failure to comply when required to do so will result in a withholding tax of 30% being deducted from US source income, and it is likely that professional investment managers will refuse to act for trusts which are not FATCA-compliant.
It is therefore important for the trustees of any UK resident trust to ascertain whether or not they have FATCA registration or reporting requirements as soon as possible.
For more information on FATCA and how it might affect you, please contact the partner at Hunters having responsibility for your legal matters, or (for new enquiries) please contact a partner in the Private Client Team.