May 31, 2013: The United Kingdom Releases Final Regulations and Guidance
Foreign Account Tax Compliance Act (FATCA)
The United Kingdom releases final regulations and guidance
The United Kingdom has released final regulations implementing the FATCA intergovernmental agreement (“IGA”) it signed with the United States on September 12, 2012. In addition to the regulations, the HM Revenue & Customs (“HMRC”) has released its final guidance interpreting the new U.K. Regulations. The guidance indicates that U.K. financial institutions (“UKFIs”) must apply the U.K. Regulations with respect to their FATCA responsibilities but may reach out to HMRC if they feel the U.S. Regulations provide more favorable treatment. Additionally, HMRC will consider whether to update its guidance or regulations if the U.S. Regulations adopt any additional or broader exemptions and will post such updates on its dedicated FATCA webpage (http://www.hmrc.gov.uk/fatca/index.htm).
Generally, the U.K. Regulations adopt many of the new provisions introduced in the final U.S. FATCA regulations including the following:
- Adopted the Holding Company and Treasury Center definition of an FFI;
- Adopted all of the new deemed-compliant categories except for the Limited Life Debt Investment Entity classification;
- Added the seed capital exemption for investment entities where investment entities that have been provided with seed capital by a member of a group are not considered related entities for the group;
- Added the depository institution exception for entities that accept deposits solely as collateral or security pursuant to a financing arrangement between the parties;
- Explicitly added credit card issuers that provide pre-loaded funds in payment cards (e.g., credit card overpayments or payment cards) in excess of $50,000 into the definition of a depository institution;
- Explicitly accepted IRS Forms W-8 or W-9 as acceptable means of establishing an account holder’s status;
- Allowed indefinite validity for account holder’s documented using a withholding certificate or other documentary evidence including a self-certification (this seems to be much broader than the U.S. Regulations that only allows such indefinite validity for individuals if Forms W-8 and documentary evidence is collected and there is no evidence of U.S. indicia); and
- Required registration of UKFIs and registered deemed-compliant entities with the IRS to obtain a Global Intermediary Identification Number (“GIIN).
In addition to adopting many of the provisions from the U.S. Regulations, HMRC also provided additional details on how entities can determine whether they are subject to the U.K. Regulations. The guidance includes details for certain entities such as trusts that may have unclear residency status for FATCA purposes and clarifies that entities with dual residency (residency in the U.K. and elsewhere), must report accounts maintained in the U.K. under the U.K. Regulations. Regarding reporting deadlines, the initial reporting deadline in 2015 remains the same as in the U.S. Regulations for the 2013 reporting period (account activity in 2013 is reported on March 15, 2015). However subsequent reporting deadlines are pushed back to May 31 for prior year activity (for the 2014 reporting period and onward, i.e. for 2014, the deadline will be May 31, 2015).
The release of the U.K. Regulations and guidance is a significant step in helping entities in the U.K. determine their FATCA responsibilities. However, several countries have yet to release implementing regulations and differences in approach across jurisdictions may pose significant challenges for global institutions and service providers. We will continue to update you as additional FATCA news and guidance is released. Copies of the U.K. Regulations and guidance are attached.
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