FATCA and the United Kingdom

133 thoughts on “FATCA and the United Kingdom”

1. Article/Petition:

   CrosBrit says: Please circulate this petition to end the UK’s #FATCA IGA and the #humanrights abuse of #accidentalamericans

   https://twitter.com/CrossBriton/status/792110320156282880

2. https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/583160/FOI2016_23806_RE_Guidance_given_to_banks_on_the_US_Foreign_Account_Tax_Compliance_Act__FATCA_.pdf

   Information Rights Unit
   HM Treasury
   1 Horse Guards Road
   London
   SW1A 2HQ
   020 7270 5000
   foirequests@hmtreasury.gsi.gov.uk
   http://www.gov.uk/hm-treasury
   06 December 2016
   Ref:
   FOI2016/23806
   Freedom of Information Act 2000:
   Banking

   Thank you for your Freedom of Information enquiry of 13th November 2016.
   You asked for the following information:“ I am seeking information on the implementation in Britain of the US Foreign Account Tax Compliance Act (FATCA). Please send me a copy of the instructions given to British banks on the enquiries they are required to make to establish whether or not a customer has a US connection.”

   I can confirm that HM Treasury does not hold information within the scope of your request. HM Treasury does not give specific instructions to banks on this topic. However HM Revenue and Customs (HMRC) has published guidance on the Gov.uk website for British banks to use as guidance for
   the steps that financial institutions must take to identify persons reportable under the UK/US FATCAagreement. The full published guidance can be found at:https://www.gov.uk/hmrc-internal-manuals/international-exchange-of-information/ieim400000

   The specific page relating to the due diligence can be found here:
   https://www.gov.uk/hmrc-internal-manuals/international-exchange-of-information/ieim402500 .

   If you have any queries about this letter, please contact us.

   Please quote the reference number above in any future communications.

   Information Rights Unit

3. above from
   https://www.gov.uk/government/publications/guidance-given-to-banks-on-the-us-foreign-account-tax-compliance-act

4. And this is the bit that gives the bird’s-eye perspective:

   https://www.gov.uk/hmrc-internal-manuals/international-exchange-of-information/ieim400140

   Background: The Wider Approach
   The ‘wider approach’ enables Reporting Financial Institutions to capture and maintain information on the tax residence of Account Holders irrespective of whether or not that Account Holder is a reportable person for any given reportable period. The due diligence procedures in each of the agreements governing automatic exchange are designed to identify accounts which are held by the residents of the jurisdictions with which the UK is committed to exchange information. However, the number of these jurisdictions is not fixed and there is an expectation that under the CRS more jurisdictions will reach agreement with the UK over time. As a result, the regulations applying the due diligence rules have been designed to adopt a wider approach to recording the territory in which a person is tax resident irrespective of whether that territory is a Reportable Jurisdiction at the time that the regulations come into force.

   Financial Institutions are required to identify the territory in which an Account Holder or a Controlling Person is resident for income tax or corporation tax purposes, or for the purposes of any other tax of a similar character that has been imposed by that territory, and to maintain this information for a period of 6 years from the end of the period in which the due diligence process is carried out. This effectively enables the financial institution to ‘future proof’ their processes such that when a new jurisdiction is added to the list of Reportable Jurisdictions the work in identifying where existing customers are resident has already been carried out. Reducing the number of times that due diligence processes have to be carried out should result in lower costs for the Financial Institutions in complying with their obligations. Financial Institutions will only need to revisit the determination of tax residence in those cases where there has been a change of circumstance.

   The main concern is to provide Financial Institutions with the legal cover they require in the context of data protection law. The regulations impose an obligation on Financial Institutions without any discretion on their part to collect this information. In such circumstances it is the legislator that must consider the question of proportionality for Data Protection Act purposes. The obligation to identify the territory in which an Account Holder is tax resident and to maintain that information for 6 years from the end of the year in which the due diligence arrangements have been applied provides the necessary data protection cover for financial institutions to comply with their obligations. Financial Institutions are permitted to apply the same due diligence standards that are required to be applied to Account Holders resident in a reportable CRS jurisdiction to all Account Holders regardless of country of residence. This includes collecting information on country of residence and TINs for Account Holders, and entity classification, if relevant.

   I am no lawyer, but it appears to me this is the nitty-gritty that keeps the AEOI implementation (including FATCA) on the legal side of UK/EU non-discrimination law: requiring customers to provide information on tax-residence is legal because it applies to all customers – not just USPs.

5. @Iota
   Except apart from “where is your tax residence?” question, they also are permitted to ask place of birth and are you a US citizen?

6. Surely the non discriminatory question should be
   “are you responsible for paying tax in any other jurisdiction?”,
   rather than ask place of birth and if you a US citizen?

7. @heidi –

   AIUI, everyone can be asked place of birth, because in some EU countries it’s part of your ID.

   As for being asked whether you’re a US citizen, as far as I can see it’s equivalent to another customer being asked if they’re tax-resident in, say, Belgium, if there is information suggesting that might be the case.

8. The UKG said (replying to consultation responders who objected to asking place of birth):

   “The requirements for collecting data on TINs and date and place of birth are included in the EU Directive. The UK has no discretion in this area. These items were included because they are a significant aid to tax administrations who use some or all of these for the purpose of matching data with their taxpayer records.”

   https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/417635/Implementing_Agreements_under_the_Global_Standard_on_Automatic_Exchange_of_Information_to_Improve_International_Tax_Compliance_-_summary_of_responses.pdf

9. Personally I find it deeply annoying that I’m unable to open a bank without proving I’m not US-tax-resident. But it’s caused by the US – not the banks, and not the UK.

10. @ Iota
    Personally I find that the UK is no longer the tolerant, liberal minded, free country I left 30+ yrs ago. Snowden reported it as having the most highly surveilled population in the world, quote “Tempora is worse than Prism, they are teaching the US” .
    The UK helped the US spy on Merkel and EU Business agenda with recording equipment on the roof of the UK embassy in Frankfurt. I am surprised the the EU didn’t accuse them of treachery.
    They fail to protect their citizens with a one way extradition agreement with the US.
    They have passed an agreement with the banks to give HMRC access to UK residents bank accounts who are deemed to owe HMRC money but without due legal process.
    I am afraid that now Brexit will draw them even closer to the US with their own form of TTIP including selling out to private medical companies at the expense of the NHS.
    I admire your belief in the UK’s innocence but I wish I could find my belief in my country of Birth again.

11. @heidi – it sounds like you had an idealistic view of your native country, which you subsequently lost. I never had such an idealistic view of my native country, in fact it would be no exaggeration to say it scared the shit out of me since before I was 12. I escaped to the UK, where I’ve lived happy and safe for over fifty years. Believe me, the squalours of realpolitik notwithstanding, the UK is a better country than the USA. 🙂

12. @ Iota
    Yes, perhaps an idealistic view derived from youth, but Harlod Wilson as bad a politician as he was, kept us out of the Vietnam war and we were always free to be a stated communist unlike others fingered by McCarthy.
    I agree , I believe the UK is much preferable to the USA…at least for now 🙂

13. The standard of politician has definitely declined steadily in both countries for many decades. 🙂

14. @iota
    I wonder how widespread this “wider approach” is. I suspect this is how all countries will implement CRS. The Australian CRS guidance (https://www.ato.gov.au/General/International-tax-agreements/In-detail/International-arrangements/Automatic-exchange-of-information—guidance-material/) looks very similar to what you have quoted from the UK.

15. @Karen – yes, I expect it’s used by many or most. It’s part of the OECD standard.

    http://www.oecd-ilibrary.org/taxation/standard-for-automatic-exchange-of-financial-account-information-in-tax-matters/wider-approach-to-the-common-reporting-standard_9789264216525-12-en

16. Although the “wider approach ” may be used by most CRS countries, it won’t necessarily have exactly the same effect, nondiscrimination-wise, that (it appears to me) it has in the UK. Presumably it would also depend what other laws are in effect which might be a factor. E.g. Canadian Charter.

17. More unrelated non-US benign people forced to wrestle with FATCA’s effects outside the US
    https://www.mumsnet.com/Talk/_chat/2839034-Any-tax-advisers-accountants-about-FATCA-entity-confusion.

    Why is the UK government letting the US arrogance apply to little local groups of mums with no possible connection to anything US and no possible risk factors being forced to take up time, Life Credit Units and potentially money in order to comply with ridiculously arrogant US law completely foreign and inappropriate to them?

18. https://www.bba.org.uk/download-file/?f=eyJ1cmwiOiJodHRwczpcL1wvd3d3LmJiYS5vcmcudWtcL3dwLWNvbnRlbnRcL3VwbG9hZHNcLzIwMTZcLzA5XC9CQkEtQ29tbWVudHMtb24tTm90aWNlLTIwMTYtNDIucGRmIiwibmVlZGxvZ2luIjpmYWxzZSwidXNlciI6ZmFsc2V9
    31 August 2016

    Proposed Qualified Intermediary Agreement
    “The BBA welcomes the opportunity to make this written submission in response to Notice 2016-42
    which contains the proposed Qualified Intermediary (QI) Agreement, and also sets out the rules which
    will apply to Qualified Derivatives Dealers (QDDs)…….”

    “1. Managing potential conflict with local law
    The proposed QDD rules require prospective QDDs to agree to take primary withholding responsibility
    for section 871(m) transactions. During the course of implementing FATCA, a number of banks and
    industry bodies (including the BBA) highlighted that in their jurisdiction, withholding on behalf of a
    foreign government may not be permitted 1, and that, at best, in a number of other countries
    clarification was needed from local tax authorities before withholding could take place.

    Addressing this was part of the purpose of the Intergovernmental Agreements signed for FATCA
    purposes, agreed by the respective tax authorities.
    However, in the case of section 871(m) and the QDD rules, we understand that there have not been
    equivalent discussions to address the withholding issue. The IRS needs to engage with their
    counterparts in other tax authorities to discuss these issues.
    There is also an issue for ensuring appropriate double tax relief to ensure that recipients of payments
    do not suffer tax on a payment under both local law and section 871(m). We are not aware that the
    tax authority of any country has addressed this issue as yet and time will be needed for governments
    to consider and address these rules. The consequence of applying section 871(m) is that income
    which would have previously been treated as sourced and taxable in one country will now instead be
    treated as taxable in the US. Since this will result in a shift of tax from the domestic revenue to the
    1 For example, the letter from the UK Ambassador to the US, dated 6 August 2010 available here:
    http://www.bsmlegal.com/PDFs/BritishEmbassy.pdf
    US, we would encourage active engagement with domestic tax authorities to eliminate double
    taxation. In particular, if a domestic authority does not recognise the section 871(m) tax, or accept the
    US Treasury view that it is a dividend, that may lead to the denial of a tax credit
    ……..”

19. Status of EU Nationals in the UK – email alerts

    https://gov.smartwebportal.co.uk/homeoffice/public/webform.asp?id=67&id2=627DF7&active=True

20. Important notice from Patricia (posted on another IBS thread) for those in the UK or thereabouts, regarding organizing/participating in a UK demonstration;

    “……….am in contact with some people who are interested in having a demonstration in London UK. There are no specific dates/places yet, just an initial idea. I indicated I would post in a few places. If you are interested please email me and I will put you in touch with them. nobledreamer16 at gmail dot com”

    http://isaacbrocksociety.ca/media-and-blog-articles-open-for-comments-part-4-of-4/comment-page-69/#comment-8088091

21. @badger There should be some very disgruntled people because of the quick withdrawal from the U.K. market of the key mass-market collective investment product that is allowable for U.S. persons in the U.K.: the U.S.-based exchange traded fund. This seems to have come about because ETF companies were unwilling to produce “key information documents” as now required in the U.K. and E.U. Details are a bit sketchy, but it seems that many ETFs may no longer be available for purchase as of 1 January 2018, although they can still be held or sold. I got a message from my broker on 13 December naming a few affected Vanguard funds but the people on this thread suggest that a wholesale withdrawal may be underway: https://www.boards.ie/b/thread/2057822332.

    It’s difficult to know what people should do except make sure that they are in holdings that make sense for the very long term if they have ETFs. Doing something last minute like investing in an annual SIPP contribution is going to raise some difficulties because the refunded tax won’t be investable in ETFs. This is a U.K./E.U. action but shows the unsuitability of forcing people to buy U.S. products under the tax code when they are not even U.S. persons even under 1930s U.S. security law, which only covers residents.

22. It looks like the main SIPP providers would allow the tax refund to be invested in stock. It may be the last chance to buy funds.

23. @badger

    Thanks for posting here! Did not think past just getting it up on one thread but this is more appropriate.

24. This https://www.washingtonpost.com/news/worldviews/wp/2017/11/28/meghan-markles-u-s-citizenship-could-cause-tax-headaches-for-british-royal-family/?utm_term=.6f1248567813 is from November 2017, but I was very interested in it because even though the news outlet is American, it did NOT mention that Markle’s ‘local’ UK accounts (including any on which she has co-signatory powers or even potential control over even if not personally owned or of personal benefit – as in a Power of Attorney, executor, etc.) are subject to FBAR reporting to FINCEN using the puny AGGREGATE account highest value on any single day in the year threshold of 10,000. USD .

    The comments are enlightening too, since many of them have no or an entirely incorrect concept of the transmission of US status via birth abroad to a USC with sufficient US residency time.

    The article’s authors only mention the FATCA form 8938, whereas Markle would have to submit both (see https://www.irs.gov/businesses/comparison-of-form-8938-and-fbar-requirements – direct from the horse’s …..). And most probably she’ll have ‘foreign trusts’ to report as well, on form 3520/A….

    Pity that the author doesn’t report on Markle’s potential exposure to the FBAR (and the potential exposure of the accounts of anyone associate with her if she is a joint accountholder, etc.), because the FBAR’s threshold continues to be more and more ridiculously low in today’s dollars as to make it even more important to highlight as intrusive and insane, for the WP readers – many of whom will be US homelanders who have never heard of the FBAR.

25. The idea that the Firm would ever let the wife of the Grand-Spare within a mile of Madge’s £££ does make me laugh. 😉