UK resident trusts which need to register with the IRS under the FATCA regulations, are advised to do so by 25 October 2014, in order to obtain a GIIN (US FATCA identification number) by the 1 January 2015 deadline.
To recap, trusts with corporate trustees do not need to register individually. The trustees will register themselves and, in due course, report on all trusts for which they act.
Charitable trusts are deemed compliant and, similarly, do not need to register.
However trusts with individual trustees will need to register (or come to some arrangement with their investment manager to deal with this on their behalf) if they delegate the management of an investment portfolio which generates more than 50% of the trust's income.
Many investment managers are offering to be the "Designated Withholding Agent" for these trusts, in which case the trust is "owner documented" and registration by the trustees themselves is unnecessary. This route is ideally suited to trusts with all of its investments under one roof, but trusts that have accounts with several investment managers may have no register themselves directly.
Registration is made directly with the IRS and can be done online.
The FATCA reporting requirements, which will apply next year, vary depending upon the precise status of the entity in question.
Reporting will be direct to HMRC (which, in turn, will pass the information to the IRS) although the mechanism for this has yet to be published and so we will provide further detail in a future edition of our Newsletter.
Very broadly, meanwhile, trustees will need to monitor whether any US persons (e.g. US residents or US citizens) are beneficiaries or, for some trusts, whether they are "controlling persons" (such as the settlor, trustees and any protector). Payments to these individuals will need to be reported but if there are no US persons, nil returns will be required.
Trustees should appreciate that FATCA compliance is a requirement of UK law and so may apply even if a trust has no US assets or other US connections. Trusts which fail to register and report face a 30% witholding tax on certain US-source payments. This may not be a concern if there are no US assets but the practical consequences of non-compliance maybe more problematic. In practice, financial institutions such as banks and brokers will need to establish the FATCA status of all their clients and trusts. Those which are not compliant may find it extremely difficult to open and maintain bank accounts and other financial services so FATCA is not something that can therefore be ignored.