FATCA: UK trusts under the UK/US IGA
All UK trusts and trustees, whether or not they have any known US connections, need to consider their status under the UK/US IGA. If they are required to register with the Internal Revenue Service (IRS) under the agreement, they must do so by 25 October 2014.
This note is intended to help trustees and their advisors and is based on our current understanding of Guidance published by HMRC in 2013. This Guidance is subject to change. Specialist advice should be sought in cases of doubt.
The UK has also recently signed IGAs with the Crown Dependencies. These IGAs will use similar, but not identical, processes to determine the status of trusts.
The UK/US IGA puts trusts into two broad categories:
- Financial Institutions (FIs)
- Non-Financial Foreign Entities (NFFEs)
The category a trust falls into depends on both the nature of the trust’s assets and the nature of the trust’s trustees (and fund managers, if applicable). Taken together, these will determine who reports on the trust and whether or not the trust needs to register with the IRS under FATCA. If you act as a trustee, there may well therefore be implications for what you should be doing as a trustee. Moreover in some circumstances the trustee (rather than the trust) is required to register with the IRS.
Generally, a trust will be an FI where:
- the trustee is an FI;
- the trustee (on behalf of the trust) engages an FI to manage the trust; or
- the trustee (on behalf of the trust) engages an FI to manage the financial assets for the trust.
In order to determine what category a trust falls into, there are a number of questions trustees need to address. These are illustrated in the below decision tree (click on the link below). The following gives further guidance on those questions.