Trustees – Are You Prepared For FATCA?
15 October 2014
FATCA (Foreign Account Tax Compliance Act) is now a part of UK law. Although it is part of larger legislation introduced in the USA and primarily designed to ensure that USA citizens are properly declaring their worldwide income to the Internal Revenue Service (IRS), there are clear implications for trustees of UK based trusts. This is the case even if neither the trustees nor beneficiaries of UK trusts are USA citizens.
For such a significant piece of legislation, it appears to be the case that its impact has rather slipped below the radar of many UK trustees and their professional advisers.
Subject to certain trusts which are deemed to be exempt from FATCA, all UK trustees must make a determination as to the status of their UK trust under FATCA. Following that determination there may or may not be a requirement to register with the IRS.
By following and answering a series of questions posed in the legislation, UK trustees will find that (broadly) their trust will be classified as either a Financial Institution (FI) or a Non Financial Foreign Entity (NFFE). There are different reporting requirements in each scenario and needless to say certain sub-divisions related to each scenario. The questions revolve around the type of trust, the identity of the trustees, the nature of the trust assets and the identity of any investment manager of those trust assets. The questions are designed to tease out whether there is a formal reporting requirement to the IRS or whether it will be possible to self certify the trust and not report to the IRS.
It is therefore critically important that trustees of UK trusts urgently address the issues raised by FATCA and make the appropriate determination. Such determination must be made by the end of this calendar year (2014).
Time is therefore extremely short and UK trustees need to act now.