Finance Act 2003 introduced legislation to enable the Treasury to make regulations for a scheme to collect information about overseas residents.
These regulations implement most of the European Directive on taxation of savings (‘the Directive’).
The Directive is intended to counter tax evasion on savings income. It does this by providing for automatic exchange of information between Member States on cross-border savings income payments made to EU resident individuals.
Three Member States - Austria, Belgium and Luxembourg - will, as an alternative to exchanging information from the outset, apply a withholding tax during a transitional period.
As well as Member States, certain UK and Netherlands dependent and associated territories and certain third countries will be either exchanging information or imposing a withholding tax.