Reportable Information: Account Closure
Reportable Information: Account Closure
The information to be reported when an account is closed depends on the regime under which the report is made.
An account is regarded as closed according to the normal operating procedures of the Reporting Financial Institution that are consistently applied for all accounts that it maintains. For example, an equity interest in an Investment Entity [see IEIM401700] would be considered closed when that interest is terminated by the transfer, surrender, redemption or cancellation of the interest or the liquidation of the entity.
An account with a balance or value equal to zero or which is negative will not be a closed account solely by reason of such a balance or value.
FATCA & CDOT Reporting
In all cases the account balance or value immediately before closure must be reported.
In the case of a Depository [see IEIM401540] or Custodial Account [see IEIM401580] closed or transferred in its entirety by an Account Holder during a calendar year the reportable information shall be:
- The payments and income paid or credited to the account during the calendar year up to the point of closure or transfer; and
- The amount or value withdrawn or transferred from the account in connection with the closure or transfer of the account.
In the case of a Cash Value Insurance Contract that has been fully surrendered during the calendar year the Specified Insurance Company will need to report:
- The total amount paid out to the Account Holder or nominated person at the close of the account. This will include any amount of interest following maturity where the amount is awaiting payment.
In the case of a purchased life annuity, if the annuitant has died or the term has ended, the Specified Insurance Company will have no further reporting requirement if the annuitant died at a time before the annual payment has been made.
The process for closing accounts will differ between institutions and between different products and accounts. The intention is to capture the amount withdrawn from the account in connection with the closure process, as opposed to the account balance at the point of closure given there is an expectation the balance will be reduced prior to point of closure. For these purposes it is acceptable for the Financial Institution to:
- record the balance or value within five business days of when they receive instructions from the Account Holder to close the account; or
- record the most recent available balance or value that is obtainable following receipt of instructions to close the account, where a Financial Institution is unable to record the balance or value at the time of receiving instructions to close the account. This may include a balance or value that predates the instructions to close the account if this is the balance or value that is the most readily available.
For accounts that close as a result of switching to another bank, the balance calculated as the transferable balance as part of the BACs account switching service.
CRS & DAC Reporting
When an account is closed the Reporting Financial Institution [see IEIM402100] must report the fact of the closure but is not required to report the balance or value of the account at closure. Any amounts paid or credited to the account in the reporting period up to the date of closure remain reportable [see IEIM402220 to IEIM402260].
For Lower Value Pre-existing Individual Accounts and Pre-existing Entity Accounts, the due diligence must be completed by 31 December 2017. This means that a Pre-existing Account could be closed in 2016 but not identified as a Reportable Account until 2017.
The International Tax Compliance (Amendment) Regulations 2017 amended the reporting obligation so that a reporting financial institution must make a return for each calendar year setting out the information required to be reported under the relevant agreement in relation to
- each reportable account maintained during the calendar year in question, and
- each pre-existing account identified as a reportable account during the calendar year in question.
Therefore information in relation to an account closed in 2016 and identified as a reportable account in 2017 should be reported in the return for 2017 due by 31 May 2018.
This means that the return in respect of 2017 will include accounts still open at the end of 2017, accounts closed in 2017, and accounts closed in 2016 but not identified as reportable until 2017.
A pre-existing individual account was closed on 4 January 2016, at which point a redemption payment of £50,000 was paid. The account was identified as reportable in August 2017. The account should be reported in 2018 in respect of the reporting period 2017. The information reported should include all the information required by the CRS, including the fact of account closure and the payment to the account holder prior to closure of £50,000.
A pre-existing individual account was closed on 23 May 2017. Dividends of £75,000 were credited to the account in the period 1 January to 23 May 2017. The account was identified as reportable in August 2017 and should be reported in 2018 in respect of reporting period 2017. The information reported should include the fact of closure and the dividends credited to the account holder prior to closure of £75,000. As the account was closed in 2017, the information reported will not include any income credited to the account in 2016.