The Foreign Account Tax Compliance Act 2010 (FATCA)Monday, November 12, 2012
FATCA was introduced in 2010 by the US Treasury in order to reduce the rate of tax avoidance by US taxpayers operating abroad.
The original draft regulations enacted under FATCA required any Foreign Financial Institutions (FFIs) who receive a payment by a US entity to sign an agreement that they will provide the US Internal Revenue Service (IRS) with information on any US taxpayers that they deal with. Effective from 1 January 2013, the penalty for non-compliance is broadly a 30% withholding tax levied on the gross proceeds of any US assets. UK pension schemes currently fall under the definition of an FFI. A large number of UK pension schemes receive US sourced income through their investments and as a result will fall under the reporting requirements, primarily through their investment managers and custodians. However, since the publication of the Act, a number of industry groups have written to the IRS to propose that UK pension schemes are exempt from the definition of an FFI. As a result, the UK government signed an agreement on reciprocal information exchange on 14 September 2012 that exempts all UK pension schemes from these onerous reporting requirements. However, further clarification is still required regarding the pension scheme exemption, and HMRC is currently consulting in this regard.
Thank you for all your assistance in helping to meet the deadline for the capital reduction exercise – your professionalism and friendly approach was appreciated.
Finance Director - Leading UK Company