HM Revenue & Customs (HMRC) has launched a new web site for financial institutions required to make reports about US taxpayer clients under the US Foreign Account Tax Compliance Act (FATCA) laws.
The online portal offers advice and access to a reporting hub for financial managers sending information about their US clients to the Internal Revenue Service (IRS).
The web site is part of the British government’s tax information swapping agreement under FATCA with the IRS.
Financial institutions have to make reports each year on:
- US resident taxpayers with bank accounts or investments with a balance of $10,000 or more
- US expats with bank accounts or investments with a balance of $200,000 or more
Under US tax law, both resident and non-resident citizens must declare their worldwide earnings on their annual tax returns.
Making FATCA returns
Only UK based financial institutions can make FATCA reports through the portal – any clients dealing with branches in other countries must be reported via that country’s tax authority or directly to the IRS, says the guidance.
Around 8,500 UK financial institutions are listed on the IRS database as having to report FATCA information.
The FATCA returns are due by May 31 each year – starting from May 2015.
The web site has facilities for reporting simple returns for organisations with less than 200 US clients or more detailed returns for those with more than 200 clients.
The HMRC web site explains FATCA is a US law designed to thwart US taxpayers from failing to declare their earnings from offshore bank accounts or investments.
Detailed guidance
Financial institutions that fail to submit FATCA reports face fines or even a 30% withholding tax on any US dollar transactions through the US banking system.
HMRC can also impose non-compliance penalties on banks and other financial institutions that do not make accurate FATCA reports.
HMRC also warns that FATCA registered financial institutions must make a ‘nil return’ if they have no US clients.
“These regulations and reporting rules only apply to the US FATCA law,” said an HMRC spokesman. “The same rules will apply to the UK’s arrangements for Crown Dependencies and Territories to report the British clients to HMRC, but at present, the web site is only for financial institutions making FATCA reports.”
The new guidance also explains how the UK FATCA tax information exchange agreement with Crown Dependencies and Territories will work, plus agreements that are under way with other European Union countries, such as France, Spain and Germany.
