Areas of the legislation:
  • International agreements to improve tax compliance

International agreements to improve tax compliance

The Foreign Account Tax Compliance Act (FATCA) aims to combat tax evasion by US tax residents using foreign accounts. It includes certain provisions on withholding taxes and requires financial institutions outside the US to pass information about their US customers to the US tax authorities, the Internal Revenue Services (IRS). Failure to meet these new reporting obligations would result in a 30% withholding tax on the financial institutions.

The FATCA provisions impose new and substantial burdens on UK businesses in identifying US taxpayers, and registering and reporting information to the IRS. Significantly for UK institutions the Data Protection Act precludes UK businesses from passing the required information to the US.

The UK-US Agreement

The government (along with France, Germany, Italy, and Spain) and with the support of the European Commission took part in joint discussions with the US government to explore an intergovernmental approach to FATCA, supporting the overall aim to combat tax evasion, while reducing risks and burdens on financial institutions. A model intergovernmental agreement (IGA) was developed and published in July 2012.The UK and the US signed an IGA - the 'UK-US Agreement to Improve International Tax Compliance and to Implement FATCA' - in September 2012 (see the 'Current documents' section below). Annex II of the IGA was amended by an Exchange of Notes between the 2 governments dated 3 June and 7 June 2013 (see the 'Current documents' section below).

The IGA reduces some of the administrative burden of complying with the US regulations, and provides a mechanism for UK financial institutions to comply with their obligations without breaching the data protection laws.

On 12 July 2013 the US announced a delay of 6 months before the commencement of FATCA. The effect of this delay is that there will be no reporting with regard to 2013, and all current deadlines for undertaking due diligence etc will be pushed back by 6 months.

Download the US announcement on the IRS website (Opens new window)

On 6 May 2014 the US announced amendments to the on-boarding processes for new entity accounts opened between 1 July and 31 December 2014. The UK won't be adopting these amendments and UK financial institutions must comply with the UK regulations in order to meet their reporting obligations to HMRC. Where UK financial institutions are required to obtain self-certification for a new customer these obligations will apply from 1 July 2014. This will maintain consistency between entity and individual on-boarding processes and the due diligence obligations for US and Crown Dependency/Gibraltar reporting purposes.

IRS Notice 2014-33 (Opens new window)

Current documents

Final Regulations laid on 9 June 2014 (Opens new window)
These regulations come into force on 30 June 2014 and replace the previous regulations laid on 7 August 2013.

Guidance published on 29 August 2014 (PDF 1MB)

UK-US Agreement to Improve International Tax Compliance and to Implement FATCA on the National Archives website (Opens new window)

Annex II to the UK-US Agreement on the Official Documents website (Opens new window)

Tax Information and Impact Note (PDF 47K)

Previously published documents

You can find further detailed information from the links below.

Implementing the UK-US FATCA Agreement

Summary of Responses: Implementing the UK-US FATCA Agreement

Regulations laid on 7 August 2013 (Opens new window)

Other UK Agreements

All the Crown Dependencies and Overseas Territories have entered into automatic tax information exchange agreements with the UK.

The UK and the Isle of Man signed an IGA - the 'UK-Isle of Man Agreement to Improve International Tax Compliance’ – on 10 October 2013. This was the first agreement of this type to be signed and published where neither party was the USA.

Guernsey and Jersey signed IGAs with the UK on 22 October 2013 – the 'UK-Guernsey Agreement to Improve International Tax Compliance’ and the 'UK-Jersey Agreement to Improve International Tax Compliance’.

The British Overseas Territory of Gibraltar signed an IGA with the UK on 21 November 2013 – the 'UK-Gibraltar Agreement to Improve International Tax Compliance’.

These 4 agreements are reciprocal, meaning that UK financial institutions will have to provide data on financial accounts held by residents of these territories.

Current documents

UK-Isle of Man Agreement to Improve International Tax Compliance (PDF 202K)

UK-Guernsey Agreement to Improve International Tax Compliance (PDF 207K)

UK-Jersey Agreement to Improve International Tax Compliance (PDF 211K)

UK-Gibraltar Agreement to Improve International Tax Compliance (PDF 207K)

Guidance for UK-CD/OT Agreements (PDF 351K)

Final regulations on the implementation of the UK-CD and Gib Agreements (Opens new window)

Final Tax Information and Impact Note (PDF 44K)

Following discussions with the Crown Dependencies and Gibraltar an amendment to Annex II has been prepared which means that there will be no obligation to report on the controlling persons of a not for profit non-financial foreign entity. This will allow UK financial institutions to treat non-financial not for profit organisations under the International Tax Compliance (Crown Dependencies and Gibraltar) Regulations 2014 the same way that they're treated under The International Tax Compliance (United States of America) Regulations 2014. Details on how this amendment will operate can be found in section 3.2.3 at page 20 of the guidance for UK-CD/OT Agreements.

Amended Annex II and III to the UK-Isle of Man Agreement (PDF 257K)

Amended Annex II and III to the UK-Jersey Agreement (PDF 257K)

Amended Annex II and III to the UK-Guernsey Agreement (PDF 290K)

Amended Annex II and III to the UK-Gibraltar Agreement (PDF 293K)

On the 5 November the UK and the Cayman Islands signed the first IGA between the UK and an Overseas Territory – the 'UK-Cayman Agreement to Improve International Tax Compliance’. Bermuda, Montserrat, the Turks and Caicos Islands and the British Virgin Islands all signed IGAs with the UK in London during the week of the Joint Ministerial Council (w/c 25 November) with Anguilla signing theirs on the 20 December.

The agreements with these territories are non-reciprocal, meaning that UK financial institutions will not have any reporting obligations under the terms of the agreements.

UK-Cayman Agreement to Improve International Tax Compliance (PDF 165K)

UK-Bermuda Agreement to Implement International Tax Compliance (PDF 189K)

UK-Montserrat Agreement to Implement International Tax Compliance (PDF 184K)

UK-Turks and Caicos Agreement to Implement International Tax Compliance (PDF 186K)

UK-British Virgin Islands Agreement to Implement International Tax Compliance (PDF 197K)

UK-Anguilla Agreement to Improve International Tax Compliance (PDF 200K)

Previously published documents

Implementing the UK's Agreements with the Crown Dependencies to Improve International Tax Compliance (PDF 219K)

Summary of responses: Implementing the UK's Agreements with the CDs and Gibraltar to Improve International Tax Compliance (PDF 75K)

Automatic exchange of information agreements

On 9 April 2013 the government - along with France, Germany, Italy and Spain - announced an agreement to develop and pilot multilateral tax information exchange based on the Model Intergovernmental Agreement to Improve International Tax Compliance and to Implement FATCA.

A joint letter was issued to the European Commission setting out the terms of the agreement.

Read the 9 April announcement on the GOV.UK website (Opens new window)

Following this announcement the Crown Dependencies and the British Overseas Territories have announced their commitment to engage in this pilot for multilateral exchange. You can read about the first announcement made on 2 May 2013, from the link below.

Find the 2 May announcement on the GOV.UK website (Opens new window)

The Organisation for Economic Co-operation and Development (OECD) has now published the final text of the Common Reporting Standard (CRS) for multilateral exchange. This can be accessed from the link below.

OECD Standard for Automatic Exchange of Financial Account Information (Opens new window)

The full version of the standard, including commentary, was published on 21 July 2014. This document is available for purchase from the OECD but the full text can also be viewed freely from the link below.

Standard for automatic exchange of financial information in tax matters

Under the terms of the CRS there is scope for the UK to exempt certain types of low risk financial institutions and/or accounts from reporting requirements. The UK will be seeking to use domestic legislation to exclude named products from the Annex II of the UK’s agreements with the US, the Isle of Man, Guernsey, Jersey and Gibraltar from reporting requirements under the CRS unless there is a policy reason to apply a different treatment.

For example, it is the UK’s intention that is that all UK registered pension schemes will be Excluded Accounts and domestic legislation will be introduced to give certainty on this issue. The UK is currently consulting on domestic implementation of the Common Reporting Standard. The consultation document was published on 31 July 2014 and will run to the 22 October 2014.

Implementing agreements under the global standard on automatic exchange of information (Opens new window)

Reporting to HMRC

You can find information on how to make a FATCA return (or any return for an international agreement to improve tax compliance) to HMRC from the link below.

Report FATCA information to HMRC

Details on future agreements will be published on this page.

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