It’s a move that would almost certainly deal a fatal blow to Britain’s tax havens, but the UK government says it has no plans to introduce a ‘son of FATCA’.
FATCA refers the US Foreign Account Tax Compliance Act which compels foreign financial institutions to reveal details of accounts belonging to US taxpayers to the Us Internal Revenue Service (IRS).
Failure to file the report results in a hefty penalty on the tax returns from the US to the institution involved.
However, there is no strict definition of what a financial institution is under FATCA, and most governments are arranging for the reporting of accounts to be filed via them rather than direct to the IRS so they can share financial information about their own taxpayers with accounts held in the US.
However, a call from the International Development Committee of UK MPs report calling for a British version of FATCA has been rejected by Prime Minister David Cameron.
Draft UK FATCA ‘seen’
The tax laws would require Crown Dependencies to exchange information with HM Revenue & Customs about UK citizens and companies.
This would include Jersey, Guernsey and the Cayman Islands.
However, the magazine International Tax Review says it has seen a leaked government document which reveals that the government has already drafted its own FATCA legislation, which will be imposed on Britain’s Dependencies and Overseas Territories.
The law would compel financial institutions to disclose all details about an account’s beneficiaries – including the identities of those who would otherwise be protected by trusts or companies.
The government will also ask for the relevant account numbers, names along with the account balance at the beginning and end of a reporting year.
Despite the government’s denial of any potential legislation, the Jersey government has looked into the issue and confirms is legislation being drafted.
FATCA support
One supporter of the move is the Tax Justice Network (TJN), which has been campaigning for such a change.
The group’s Richard Murphy said that Britain’s Crown Dependencies and Overseas Territories positions as tax havens will ‘never be the same again’.
“The legislation requires full and open disclosure in an automatic information exchange on trusts, companies and own owns the assets,” he said.
He explained that people holding funds in a tax haven now had two options: either to own up as ‘the safest’ option or to ‘flee’ but he reckons it’s already too late for asset holders to follow that line now.
Malcolm Couch of the Isle of Man Treasury declined to comment on the prospect of a UK FATCA but said that discussions on international tax cooperation had moved to a new place after it became clear that FATCA will work.
