Foreign Account Tax Compliance Act (FATCA) – United States of America (USA)
It is widely anticipated that the States of Jersey will soon sign an Intergovernmental Agreement (IGA) with the USA to implement the new Foreign Account Tax Compliance Act (FATCA). Under such an IGA, all financial institutions in Jersey will be obliged to identify all “account holders” who are US Persons for tax purposes and to exchange certain information with the US Internal Revenue Service (IRS) in respect of those US account holders and the accounts held by them.
In the event of this IGA being signed service providers in Jersey will need to identify whether or not their clients are US Persons as defined.
Service providers will be obliged to make the first report to the local authorities, who will pass the information to the IRS, by June 2015 in respect of 2014 information on relevant clients. Individual client entities may also be required to conduct similar analysis, consider registration with the IRS and plan for reporting by June 2015.
In addition, service providers will be required to collect additional information from clients for all new contracts entered into with effect from 1 July 2014 so that clients who are classed as US Persons for tax purposes can be identified.
International Agreement – United Kingdom (UK)
Alongside FATCA, on 23 October 2013 the States of Jersey signed a separate IGA with the UK. This has a similar effect and will require financial institutions to report certain information on all their clients who are resident in the UK for tax purposes to Her Majesty’s Revenue and Customs (HMRC).
The effect of both international agreements is that, for new engagements after 1 July 2014, service providers will need to ask all clients for additional information to verify their US Person status or UK residency status for US and UK tax purposes. This additional information will supplement that already needed for existing “Know Your Customer” requirements.
For UK Resident, Non UK Domiciled clients, who are remittance based users and who have previously elected for an exemption to the Directive, service providers will in future be obliged to exchange information with HMRC on those accounts. The first set of such information must be passed to HMRC by 30 September 2016 based on the calendar year starting on 1 January 2014.
UK Tax Disclosure Facility
Under the new Taxation (Implementation) (Disclosure Facility) (Jersey) Regulations 2013 which came into force on 25 June 2013, all financial institutions in Jersey are obliged to make clients aware of the disclosure facility made available by HMRC to those who may have been resident in the UK for tax purposes in the period commencing 6 April 1999 and ending on 31 December 2013. Full details of the facility can be found at the following address: http://www.hmrc.gov.uk/offshoredisclosure/facilties.htm.
Individuals who have been resident in the UK for tax purposes and have not paid the right amount of tax may be able to inform HMRC using the disclosure facilities and receive the best terms on offer.
The website http://www.hmrc.gov.uk/offshoredisclosure/facilities.htm provides full information about the disclosure facility and explains why disclose, how to disclose, and what happens if you do not. Anyone in any doubt about the potential impact of these changes should seek independent advice from a professional tax advisor.
At Crestbridge we support all efforts to harmonise international tax compliance and transparency whilst maintaining high standards of client data security and confidentiality.
We do not provide tax advice, and we recommend that you seek independent advice from a professional tax advisor about the impact of this information on your own position.