The U.S. Foreign Account Tax Compliance Act (FATCA) Regulations came into effect on 1 July 2014.

What does that mean to me?

With the latest release by HMRC of the Guidance Notes for implementation of these regulations in the UK having been issued on Thursday this is an ideal time to review your position.

As these regulations are being implemented in more than 100 countries/jurisdictions worldwide, you should, by now, have considered (or be considering) your FATCA status, or classification.

The impact of FATCA implementation will depend entirely upon that status.

Individuals and Non-Financial Foreign Entities (NFFEs) are not overly impacted by FATCA but may be asked to certify if they, or in the case of NFFEs their owners or substantial controllers are, or are not, US persons and to provide details of all their tax residencies together with tax identification numbers (or similar), to any Financial Institution with whom they transact. This will be apparent, for example, when opening a bank account. Ogier Fiduciary Services (OFS) Group companies may also request such a certification, and that will depend upon the extent and nature of the services we are providing to you.

These clients will have no further obligations under the FATCA regime unless, in the case of a NFFE, there is a change in circumstances which would require them to be re-classified as a Financial Institution (FI).

The greatest impact is on those of you who are classified under the regulations as a Financial Institution. The definition of a Financial Institution is very broad so if you are still unsure of your status please do not hesitate to contact us.

If the analysis required for classification concludes that you are a FI it should also have identified if you fall into any of the “deemed compliant” categories where registration is not required, otherwise you should have registered through the IRS Portal and will have been allocated a Global Intermediary Identification Number (GIIN).

* Financial Institutions in many jurisdictions have until 31 December 2014 to effect their registration – although there is no obvious benefit in deferring this obligation.    

A Financial Institution, with effect from 1 July 2014, should also have implemented FATCA compliant “on-boarding” procedures. These are the procedures which relate to the take on or creation of any new financial account holders – they will also have introduced or modified procedures to identify and respond to any change of circumstances which may impact upon a financial account holder's status. Again the definition of a financial account is quite broad but typically these would be created by the services or products you provide to clients or by the individuals and/or entities that hold an equity or debt interest in the financial institution itself (ie owners, beneficiaries, shareholders, limited partners etc.).

The FI's computer systems, used for maintaining financial account holder data, should have been modified/developed to capture the additional data required by the regulations.

The following obligations will remain to be satisfied by the FI (some of these may already have been completed):

  • Review of pre-existing account holders to identify any which may be reportable and to cure any with conflicting indicia.
  • Analysis of reporting requirements and identification and storage of the required financial data.
  • Build reporting capabilities to the relevant local tax reporting authority.
  • Independent assurance review of key FATCA obligations (this is not an obligation required by regulation but may be desirable).

Remember that the purpose of the FATCA regulations was to create the requirement for non-US entities who are classified as Financial Institutions to identify US Persons and to report certain financial data on those US Persons to an appropriate tax authority.

What about UK FATCA?

In addition to US FATCA, clients who are resident in the UK, it’s Crown Dependencies or Overseas Territories should also have responded to the International Tax Compliance Agreements which are often referred to as UK FATCA.

Where US FATCA requires FIs in all jurisdictions to identify US financial account holders, the UK agreements require FIs in the Crown Dependencies and Overseas Territories to identify UK financial account holders – and because of the reciprocal nature of some of these agreements requires FIs in the UK to identify Jersey, Guernsey, Isle of Man and Gibraltar account holders.

To summarise, from the perspective of the OFS operating jurisdictions:

Click here to view table,

The obligations arising from these US and UK agreements are broadly identical (except there is no registration requirement under the UK agreements) and the timeline for compliance is similar, therefore a FI’s compliance programme will ideally be at the same stage for both regimes.

How does the timeline look now?

The key dates for the remaining obligations for FIs, in an IGA jurisdiction, are as shown:

Click here to view table.

Please Note :

  • The deadlines for reporting, of US and UK account holders data, shown here are typical but some jurisdictions (ie. Jersey and Guernsey) have indicated that reporting is required by 30 June in each year.
  • Some jurisdictions will require FIs to file “nil reports” even when they have no US 

What else needs to be considered?

The Common Reporting Standard (CRS) as mentioned in our last briefing was developed in response to the G20 request and it has now been approved by the OECD Council on 15 July 2014.

Under these arrangements many more jurisdictions will be putting FATCA style agreements in place, the first of these likely to become effective from 1 January 2016.

For those of you who have been classified as FIs under the US FATCA regulations, the CRS poses a further challenge as there will be a need to respond to each of these agreements too. It will be beneficial to consider now how the remaining deliverables from any current FATCA compliance programme can developed to ease the burden of implementation of the CRS as it is rolled out globally.