Guidance

Automatic Exchange of Information: financial institutions - quick guide

Updated 17 December 2015

This guidance was withdrawn on 2 June 2016

This information has been updated. Please read Automatic Exchange of Information: financial institutions.

All references to Automatic Exchange of Information (AEOI) include the Foreign Account Tax Compliance Act (FATCA) and Crown Dependencies and Overseas Territories (CDOTs) requirements.

1. Automatic Exchange of Information (AEOI)

The UK is party to a number of international agreements designed to provide tax administrations with details of financial accounts and assets, owned by individuals and entities that are resident for tax purposes in their jurisdiction, but which are held by financial institutions (FIs) in other territories.

The UK government has introduced legislation that imposes obligations on the UK financial sector to review and collect details of accounts held by persons that are tax resident elsewhere and report this to HM Revenue and Customs (HMRC) for onward transmission under the exchange of information articles in the various treaties and conventions to which the UK is party. In return, those jurisdictions supply HMRC with similar information on UK tax resident individuals and entities holding accounts with their FIs.

The UK has legislation in place for automatic exchange of financial account information under three different regimes:

1. The United States Foreign Account Tax Compliance Act – FATCA
   
   FATCA requires FIs outside the United States of America (USA) to pass information about their USA customers to the USA tax authorities, the Internal Revenue Service (IRS). Under the terms of the agreement, UK FIs will provide HMRC with the required information and HMRC will then forward the information to the USA IRS.

2. The Crown Dependencies and Overseas Territories (CDOT)
   
   The Crown Dependencies of Guernsey, the Isle of Man and Jersey and the UK Overseas territories of Anguilla, Bermuda, the British Virgin Islands, the Cayman Islands, Gibraltar, Montserrat and the Turks and Caicos Islands have all entered into agreements with the UK to automatically exchange on financial accounts.
   The agreements with the three Crown Dependencies and with Gibraltar are reciprocal thus imposing obligations on UK FIs to identify, maintain and report information to HMRC on financial accounts held by individuals and entities resident for tax purposes in those territories.

3. The Common Reporting Standards (CRS) – developed by the Organisation for Economic Co-operation and Development (OECD) – is a global standard for the automatic exchange of financial information. There are some distinct differences between FATCA and CRS due to the multilateral nature of CRS compared to FATCA being USA specific, such as reporting on the basis of citizenship as well as tax residence for FATCA and only tax residence under CRS. Also the FATCA withholding tax which introduces additional features into the reporting process that are not needed when implementing CRS.

This guide concentrates on FATCA and CDOTs, for more information on these regulations and those listed above, further information can be found in the following guidance material:

The International Tax Compliance (United States of America) Regulations 2014

Automatic Exchange of Financial Information

The International Compliance (Crown Dependencies and Gibraltar) Regulations 2014

2. When AEOI applies

The various UK regulations for AEOI imposes obligations on UK FIs. A UK FI is any FI resident in the UK as well as any branch of a non-resident FI located in the UK. AEOI applies if you fall within the definition of a FI under AEOI reporting.

There are four categories of FI common to each of the agreements:

• custodial institutions
• depository institutions
• investment entities
• specified insurance companies

For definitions of the above terms, please refer to guidance material – a link to the guidance can be found above.

3. Data protection

All reporting to HMRC for AEOI purposes is done in order to comply with UK law. As FIs have a legal obligation to provide this data there are no data protection issues.

4. Submitting an AEOI return

You can submit your return by using the latest version of the HMRC XML Schema or via HMRC Online Services. To submit a return, you must be a registered user of the Government Gateway and must have also registered for AEOI service.

Guidance to submitting a return can be found here

5. No accounts to report

For FATCA purposes, if you fall under the definition of an FI, you need to register with the USA IRS and obtain a Global Intermediary Identification Number (GIIN).

If you have no reportable accounts, there is no longer a requirement to submit a nil return. However, if a UK FI is in a nil reporting position through applying the de-minimis $50k or $250k threshold on pre-existing accounts, it will still be necessary to submit a nil return in order to make the election.

6. Reporting at entity level

Other than in cases of overseas branches or permanent establishments each qualifying entity will be treated as a single FI. Collective investments schemes (such as unit trusts) can report at ‘umbrella’ or sub-fund level. Each reporting FI will be responsible for submitting a return every year and for FATCA will need its own GIIN.

Even though every FI will be legally responsible for the submission of its own return, it’s possible for one member of the group to undertake registration and reporting for other FIs within their group.

7. Accounts held by overseas branches or subsidiaries

You can only report to HMRC on accounts held in the UK.

If a UK resident entity has an overseas branch or a permanent establishment, then the overseas branch or permanent establishment will not be a UK FI. On the same basis, if an overseas entity has a UK branch or a permanent establishment, then the UK branch or permanent establishment will be a UK FI (provided it comes within the definition of an FI). Each overseas branch or permanent establishment will need its own GIIN for FATCA.

8. Reporting on behalf of others

FIs can appoint a third party service provider to report on their behalf.

In certain instances registration and submission of returns can be undertaken by a ‘Sponsored Entity’. For further information, please refer to guidance material - a link to the guidance can be found at the end of Question 1 above.

9. Reporting multiple owners for a private individual account, e.g. husband and wife joint account

Individual accounts with multiple owners should be reported as separate individual accounts. The account should only be reported in respect of a holder who is a resident in the reporting jurisdiction or a citizen in the case of the USA.

This means that if only the husband is a resident (or citizen) in the reporting jurisdiction then the account is reported to HMRC as if it were held solely by the husband (full balance and all relevant payments). If both the husband and wife are residents (or citizens) in the reporting jurisdiction, then the account (balance and payments) are reported twice to HMRC, once as if it is held solely by the husband and once as if it were held solely by the wife. The reason for reporting in this way is because FIs cannot practically report on individual shares of income. However, this does not mean that each holder of a joint account will be treated as receiving all of the income for tax purposes.

10. No fixed format addresses

It is government wide data policy to use fixed format names and addresses. Free format addresses will not be accepted.

If you convert from free form addresses, or from a different fixed form then best endeavours at mapping will be accepted. If you use your address line 1, 2, 3 and city to fill building, street, etc. fields this will be accepted. City and country data fields are mandatory.

11. Non-compliance with AEOI procedures

HMRC can charge penalties for non-compliance and late filing.

For more information on penalties, please refer to the International Tax Compliance Regulations 2015.

12. Further information

Detailed guidance and regulations on reporting under AEOI for FIs can be found here.

If you have any queries in respect of guidance material, further assistance can be provided by calling HMRC’s helpline.