Solicitors – Have your clients got the tax FATCA?
Do you have trust clients? Have you considered whether they are caught by FATCA? One thing is for sure – your trust clients are unlikely to have thought of it! With the deadline for registering looming, now is the time to check which trusts are caught, and take action to register them. We have already been offering advice to our trust clients, and are well placed to assist you with any questions that you may have.
For those still unsure about the facts on FATCA we have provided an overview below:
What is FATCA?
In March 2010 the United States put into federal law the Foreign Account Tax Compliance Act (FATCA) to ensure its citizens are fully disclosing their worldwide income. FATCA imposes an obligation on a Financial Institution (FI) to inform the U.S. Inland Revenue Service (IRS) when any sums are paid to or for a US person, regardless of where in the world the payment is made.
As a result of the UK-US intergovernmental agreement, legislation was introduced by Finance Act 2013 making it a legal requirement in the UK to comply with FATCA.
An FI will normally be a bank, insurance company or other investment house. However, some trusts and investment companies may also be classed as a Financial Institutions as defined by FATCA.
FATCA. Are you ready?
On an annual basis, banks and other affected Financial Institutions such as investment companies will be required to report information the IRS via HM Revenue & Customs (HMRC) on accounts held directly or indirectly by US Persons. Such accounts may include current accounts, savings accounts, deposit accounts, certain insurance policies and interests in investment funds. The critical point here is that even if an entity has no US connections, action is still required.
How does FATCA affect me?
Potentially, all companies, partnerships and trusts will asked by their bank or stockbroker requesting to confirm their FATCA status. Banks may cease to act for trusts who cannot provide the correct details.
FATCA key dates
Financial Institutions will need to register with the IRS and obtain a Global Intermediary Identification Number (GIIN) before the end of 2014. The reporting deadline to the HMRC for the year 2014 is 31st May 2015 where you will have to submit certain information about each US account holder.
Identifying your clients’ correct FATCA status and complying with the reporting regulations is a complex process so further advice should be sought if you are in any doubt.