Graham Doubtfire, Tax Director at Scrutton Bland talks US legislation.
Have you tried to open a bank account recently? If you have, did you notice that probably for the first time, you were asked about whether or not you had any connection with the United States? If you did, you are not alone, and if you haven’t yet had this experience, I suspect that it won’t be long before you do. You might, quite understandably, wonder why your bank is concerned as to whether or not you have links with the US, however it is not your bank that is interested, it’s the US Government.
US citizens have always been required to report their income and certain expenses to the US Internal Revenue Service and for the vast majority of those citizens, this reporting obligation does not disappear if they leave the US to live abroad. In reality however, the US believes that many of these citizens are failing to report their foreign income to the IRS and as a result, the US is missing out on tax revenues. Their solution to this issue, was to introduce an incredibly wide reaching piece of legislation, part of which is known as the Foreign Accounts Tax Compliance Act, or FATCA for short.
You might quite reasonably ask why US legislation is affecting so many people in the UK, but the simple answer is that it’s because we adopted part of this US legislation into our own 2013 Finance Act. In fact, we were not alone in doing this as a number of other countries have taken similar steps and as a result of this, our UK banks and other financial institutions are now required to identify any ‘US persons’ amongst their clients and in some circumstances, also to deduct 30% withholding tax from any payments made to them. This legislation applies not only to individuals, but also to Trusts and companies.
As you can probably imagine, the effects of this legislation have come as quite a surprise to a great number of people, and there is an understandable reluctance to comply with legislation which does not have its origins in the UK, however because it is now part of UK law, compliance is unfortunately not optional. So where does this leave UK tax payers?
Well, for the majority who have no US links, it is likely to present little more than an inconvenience, but for those with US connections, some form of reporting will probably be required. How much and by whom will depend on the individual circumstances. One thing however is very clear: US persons who aren’t reporting their income to the US are unlikely to be able to stay under the radar in the future.
So how can we help? As a member of the Nexia International network, we are able to work with tax specialists not just in the US, but all over the world, to help you make sure that your UK and foreign tax affairs are up to date. In fact, the US currently has an amnesty, which we have used to help a number of people bring their US affairs up to date. If you think that this legislation is likely to affect you and would like to talk to one of our tax specialists, then please contact our Private Client team using the following details:
t: 01473 267000