HM Treasury and the US Internal Revenue Service (“IRS”) have signed an intergovernmental agreement on improving international tax compliance and the implementation of FATCA.

FATCA is a piece of US legislation which would impose a 30% withholding tax on US income earned by a non-US “financial institution” unless it agrees to give information to the IRS about US citizens and taxpayers who have an interest in it. As FATCA is very widely drafted, it could treat UK pension schemes as financial institutions – and impose the 30% tax on their US investment returns – if any scheme member, or even any dependant of a scheme member, is a US citizen or taxpayer.

The intergovernmental agreement seeks to exempt most UK pension schemes, including all registered pension schemes from the scope of FATCA.


No immediate action required, but schemes with US-based investments (including through pooled funds) should continue to monitor developments as they may still need to provide evidence of their exemption from FATCA to the managers of those investments.


The European Securities and Markets Authority has indicated that it may clarify the guidelines which it recently issued on securities lending by pooled funds. The guidelines require all securities lending revenues, net of operational costs, to be paid by the fund manager to the fund and are due to come into force in February 2013.

Whilst the guidelines should in theory mean that investors in the fund see a greater return, concerns have been expressed that lack of clarity in the guidelines as to what constitute “operational costs” may mean those costs can be manipulated to allow the fund manager to continue to receive a profit.


No action required.