Countering cross-border tax evasion by individuals: European Directive on taxation of savings
Published 4 July 2005
© Crown copyright 2005
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This publication is available at https://www.gov.uk/government/publications/european-union-savings-directive-countering-cross-border-tax-evasion/countering-cross-border-tax-evasion-by-individuals-european-directive-on-taxation-of-savings
The European Union Savings Directive (Council Directive 2003/48/EC) (‘the Directive’) was agreed on 3 June 2003. It aims to counter cross-border tax evasion by collecting and exchanging information about foreign resident individuals receiving savings income outside their resident state. The Government believes that exchange of information between tax authorities is the best way to ensure that individuals pay the right amount of tax on cross-border income from savings. The Government therefore supports the Directive, the ultimate aim of which is effective taxation by exchange of information.
To implement the Directive, and to help further the general aim of ensuring individuals pay the right amount of tax on cross-border savings income, HM Revenue & Customs (HMRC) has developed a scheme to collect information about the payment of savings income to certain overseas residents, and to exchange this with certain other countries.
The scheme mainly affects banks, registrars, custodians and other financial institutions that make interest payments to individuals in prescribed territories. But it may also affect market operators who purchase money debts from individuals in prescribed territories or redeem money debts held by individuals in prescribed territories. It will also be relevant to those who hold or administer money debts on behalf of others and those who advise paying agents (such as accountants, tax advisers or solicitors). It comes into effect on 1 July 2005. However, the reporting requirements differ depending on whether contractual relations are in place before 1 January 2004.
The first savings income reports will cover the period 1 July 2005 to 5 April 2006 and must be submitted to HMRC by 30 June 2006. Reporting under sections 17 and 18 TMA will continue as normal. Reports for 2004-05 (that is those reports covering the period 6 April 2004 to 5 April 2005) should use the revised reporting format as planned.
If you think you might fall into one of the above categories then you should look at the guidance that has been produced by HMRC to assist industry in meeting its obligations under the Directive. This will help you decide, among other things, whether you are a paying agent and, if so, tell you what you have to do.
Alternatively, if you are a UK resident individual and have money invested overseas or represent such an individual, you may find the information on the UK investors page of use to you. This page contains information on how the Directive will affect you and your money whether it is paid through a paying agent in a jurisdiction which will exchange information or that has opted for the withholding tax. This page also contains a link to the legislation in Finance Act 2004.
There are a series of reference documents, guidance notes and examples.