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HMRC internal manual

International Exchange of Information Manual

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HM Revenue & Customs
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Miscellaneous: Cash Value Insurance Contract: Prevention of Sale to Non-Resident Account Holders

Miscellaneous: Cash Value Insurance Contract: Prevention of Sale to Non-Resident Account Holders

Pre-existing Cash Value Insurance Contracts or Annuity Contracts that are unable to be sold to residents of a Reportable Jurisdiction, including the USA, because of legal or regulatory restrictions do not need to be reviewed, identified or reported for FATCA purposes and do not need to be reviewed, identified or reported, subject to an election to that effect, for CRS purposes.  This also applies to similar insurance policies written in Trust or assigned to a Trust on or before 30 June 2014.

This does not apply to reporting under the CDOT IGAs or the DAC.

FATCA

For FATCA, this exemption only applies where both of the following conditions are met:

  • The Financial Institution’s Cash Value Insurance Contracts and Annuity Contracts cannot be sold into the USA without legal or regulatory authority, and
  • UK law requires reporting or withholding in respect of these products.

 

The sale of contracts to US residents will be considered effectively prevented if the issuing Specified Insurance Company (not including any US branches) is not licensed to sell insurance in any state of the US and the products are not registered with the Securities and Exchange Commission.

Under UK law there will either be reporting or withholding on such pre-existing contracts through or under one of the following mechanisms:

  • Chargeable events reporting regime.
  • Income minus Expense Regime (I-E).
  • Basic rate tax deducted from the interest portion of a Purchased Life Annuity.

 

CRS

For the CRS this exemption only applies where the Financial Institution has made an election to apply the exemption and the following condition is met:

  • The Financial Institution’s Cash Value Insurance Contracts and Annuity Contracts cannot be sold to residents of Reportable Jurisdiction without the legal or regulatory authority of that Reportable Jurisdiction.

 

The CRS exemption contains a second condition which is an alternative to the above which would require UK Financial Institutions to be prevented under UK law from selling such contracts to residents in another jurisdiction. No such prohibition exists.