The International Tax Compliance (United States of America) Regulations 2013(SI 2013/1962) were laid on 7 August 2013 and came into force on 1 September 2013. They implement the UK-US intergovernmental agreement (made on 12 September 2012) to improve international tax compliance and to implement Foreign Account Tax Compliance Act (FATCA).
FATCA is a US piece of legislation designed to combat tax evasion through the use of overseas financial institutions. These financial institutions are widely defined and include UK pension schemes.
The intergovernmental agreement provides for the US and UK to automatically exchange specified information on reportable US and UK financial accounts maintained by FATCA reporting financial institutions. The agreement is closely based on the model agreement from July 2012. However, it contains an annex listing the UK financial institutions that are FATCA non-reporting entities. These non-reporting entities are exempt from the FATCA requirements and include:
- pension schemes that are registered with HMRC; and
- pension arrangements where annual contributions are limited to £50,000 and funds cannot be accessed before age 55 except in circumstances of serious ill-health.
HMRC published revised draft regulations and guidance on implementing the Agreement on 31 May 2013. However, on 12 July 2013, the IRS issued a notice providing a six-month delay for the commencement of FATCA. The effect of this delay is that there will be no reporting with regard to 2013 and all current deadlines for undertaking due diligence will be postponed by six months. This delay is reflected in the finalised regulations.
For more information, please see the guidance note accompanying the regulations, released by HMRC on 14 August 2013.