FATCA – an urgent issue for Trustees

Posted 04/09/2014

Trustees of UK Trusts will be starting to hear from their banks and financial advisers with queries about their FATCA status and requests for a GIIN number. What is all this about?

In a nutshell, the US want to know whether any tax is due to them on income paid from UK trusts to a person who is (or should be) a US taxpayer. The US and UK governments have made an agreement that information will be collected from UK trustees by HMRC on behalf of the US Inland Revenue Service (IRS) and passed to the IRS. The Foreign Account Tax Compliance Act (FATCA) is the name of the US legislation governing this, which the UK has adopted. FATCA may oblige UK trustees to register with the IRS even if there is no US involvement at all.

Outrageous though this may seem, it is the way of the world at present and there are similar agreements following between many other countries, including the UK and its various offshore jurisdictions. The OECD is working on a global agreement to which many countries are expected to sign up.

The UK-US agreement is the first, and many important practical details are still being worked out. In the meantime however, some key points are known:

• All UK trusts which under FATCA are obliged to register with the IRS must be on the register by the end of December 2014. In practice that means they must have registered by 25^th OCTOBER 2014.

• UK Trusts which are purely property owning and have no investments or financial assets at all will not need to register.

• Failure to register a trust which is obliged to do so will result in penalties, in particular there will be a 30% withholding payment from payments by agents who are themselves subject to FATCA obligations, such as investment managers. Also, it will become increasingly difficult for trustees to use the services of other financial institutions because they will need to know the FATCA registration number (the GIIN) or the reason why the trust does not have one.  

• The trustees of every UK trust will urgently need to take some action about FATCA, in order to be sure that they have taken any steps which are required in good time for 25^th October.

Ashtons Legal’s Trust and Tax Team is advising trustees for whom we already carry out the day to day trust administration, or who contact us about FATCA, on the steps they need to take, as the details become clearer.

Contact Gillian Brasher (gillian.brasher@ashtonslegal.co.uk), Jennie Pratt (jennie.pratt@ashtonslegal.co.uk), Marie Hawkins (marie.hawkins@ashtonslegal.co.uk) or Sara Tollerton (sara.tollerton@ashtonslegal.co.uk) to discuss your trust.