Synopsis: STEP, The Law Society of England & Wales and ICAEW have produced joint guidance examining how UK trusts will be affected by the UK/US Intergovernmental Agreement (IGA).
Date posted: Thursday, February 06, 2014
The Foreign Account Tax Compliance Act (FATCA) which comes fully into effect in July 2014 with the aim of combating tax evasion by US tax residents using foreign accounts. One of the most significant consequences of FACTA is that it requires financial institutions outside the US – including certain trusts – to pass information about their US customers to the US tax authorities, the Internal Revenue Services (IRS).
Under the terms of an agreement signed by the US and the UK implementing FACTA in the UK (the US/UK IGA), trusts are placed into two broad categories:
- Financial Institutions (FIs)
- Non-Financial Foreign Entities (NFFEs)
The category a trust falls into depends on both the nature of the trust’s assets and the nature of the trust’s trustees (and fund managers, if applicable). Taken together, these will determine who reports on the trust and whether or not the trust needs to register with the IRS under FATCA.
While most family trusts will generally be classified as NFFEs, they may need to register with the IRS if they use corporate trustees or discretionary fund managers.
STEP, The Law Society of England & Wales and ICAEW have produced joint guidance examining how UK trusts will be affected by the UK/US Intergovernmental Agreement (IGA).
COMMENT
All UK trusts and trustees, whether or not they have any known US connections, need to consider their status under the UK/US IGA. If they are required to register with the IRS under the agreement, they must do so by 25 October 2014.
This latest guidance from STEP et al is intended to help trustees, and their advisers, determine the extent of their obligations under FACTA and is based on guidance published by HMRC in 2013. Revised HMRC Guidance is expected later this year.
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