British Expats Face FATCA Account Closures
Banks are threatening to close accounts of British expats living in the USA if they fail to complete piles of paperwork to comply with the Foreign Account Tax Compliance Act (FATCA).
Millions of US expats worldwide are already caught by the law which requires foreign financial institutions to supply details of bank balances and earnings from investments to report the information to the Internal Revenue Service (IRS).
Now banks in Britain and other countries that have customers living in the US are telling customers to file proof of identity and other financial information or their accounts will be shut.
HSBC has reportedly given British expats in the US 90 days to supply the information or to find somewhere else to bank.
However, in many cases, the expats have already given the information to the IRS and are being asked to pass the same paperwork to their banks to send back to the IRS.
Customers turned away
Trade body the British Bankers Association sympathises with the plight of British expats in the USA but explained the banks have no option but to obey FATCA regulations.
“The banks have no choice but to ask for the information,” said a spokesman.
“The British government has an agreement with the US government that lays out the rules the banks must follow to comply with FATCA and this includes identifying any customers living in the US who hold offshore bank accounts or investments.”
For some banks, the backlash from expats about FATCA and the cost of implementing systems to meet the law has led to them turning away customers caught by the rules.
Many financial firms in the UK have turned away their US clients because of FATCA and now British expats are facing the same treatment.
What is FATCA?
FATCA is a US law aimed at identifying US taxpayers with cash and assets overseas and who have failed to disclose any earnings and capital gains on which they should have paid tax.
The rules not only apply to US citizens, but British expats who hold a green card.
FATCA only indirectly affects taxpayers because the financial institutions with which they do business have to make reports about customers each tax year, while the customers have no obligation to make any tax filing under the act.
However, the financial institutions they deal with have a duty to identify any customers who are US taxpayers, which is where the burden of giving banks paperwork comes in. The IRS then compares reports from the banks with personal filings to ensure the right amount of tax is paid.