FATCA update for UK trustees
Many UK advisers believe that the Foreign Account Tax Compliance Act (FATCA) only applies to UK trusts if there are US beneficiaries, settlors or investments. This is not true. FATCA will apply to all financial institutions (banks, brokerage firms, trust companies and all financial accounts) in the UK and will require all financial institutions to file reports. Currently, if there is no US beneficiary or ‘owner’ of a trust, then the report should be a pro formazero report. Nevertheless, due diligence is required under the UK regulations and guidance issued by HMRC before such a report can be signed. These requirements will need to be met before 31 December 2014 and in practice trustees may be required to comply by banks and financial institutions from the middle of this year.
Under the US-UK intergovernmental agreement (IGA), UK trusts with financial accounts will likely be treated as foreign financial institutions (known as FFIs). If the trust has a corporate trustee, that corporate trustee will almost certainly, itself, be an FFI and therefore will be required to register with the US Internal Revenue Service (IRS) and obtain a global intermediary identification number (GIIN). Using that GIIN, the trust corporation will then be required to file an annual FATCA report with HMRC with information about US beneficial ownership. Trusts administered by the trust company will, without any separate trust registration, be treated as trustee documented trusts. This will mean that the trust company will need to file reports with respect to each trust: no separate registration with the IRS will be required in relation to the individual trusts. However, if a trust has only individual trustees and that trust holds an investment, portfolio then a registration will need to be made on behalf of the trust to obtain a separate GIIN and file a separate HMRC-FATCA report…
Credit: The Lawyer