UK FATCA – A Guide For Taxpayers

The clock is ticking for taxpayers who have undeclared income and investments held in offshore accounts in British Crown Dependencies or Overseas Territories.

Tax authorities in these offshore financial centres will automatically tell HM Revenue & Customs (HMRC) in the UK details of account t holders and their holdings for the 2014 and 2015 tax years from September 30, 2016.

If this information has not been disclosed on a self-assessment return, the information is likely to trigger a tax inquiry.

The new measures are dubbed the UK FATCA after the US Foreign Account Tax Compliance Act (FATCA) which kicks in on July 1, 2014.

Who reports under the UK FATCA?

Financial institutions in Jersey, Guernsey, Isle of Man, Anguilla, Bermuda, British Virgin Islands, Cayman Islands, Gibraltar, Montserrat and the Turks and Caicos Islands will send details to HMRC about the financial affairs of UK resident clients.

What accounts are covered by UK FATCA?

Financial institutions, like banks, investment funds and pension funds will have to identify bank accounts, savings and investments controlled by UK clients that they operate from June 30, 2014 onwards.

That gives UK taxpayers just two months to put their financial affairs in order.

What is reported and when?

Crown Dependencies and Overseas Territories must file financial information about UK account holders for the 2014 and 2015 tax years to their local tax authorities for May 31, 2016.

The tax authorities will then forward that information to HMRC by September 30, 2016.

From that date, financial institutions must report the previous year’s data to their local tax authority by May 16 the following year, while the information must be received by HMRC by September 30.

What are the exceptions to UK FATCA?

Accounts with a cash balance or equivalent value of £29,661 (US$50,000) are exempt from UK FATCA. Non-domiciled UK taxpayers taxed on the remittance basis can opt for alternative reporting rules.

What information is reported?

The financial institution must pass on the following client information:

  • Full name
  • Address
  • Date of birth
  • National Insurance Number
  • Gross payments and assets transfers into and from the reportable account in the relevant tax year
  • The account number
  • FATCA identifier

What should account holders do?

If any British taxpayers has undeclared income in offshore accounts that fall under the UK FATCA, they should consider full disclosure to HMRC as soon as possible to reduce interest and penalties.

HMRC has a disclosure arrangement for each financial centre.

What are the likely penalties for non-disclosure?

Typical fines are 10% of the tax due up to April 5, 2009, and 20% from April 6, 2009 to date plus interest on any tax due. The disclosure period starts from April 1, 1999 – any earlier undisclosed accounts are likely to be ignored.

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