UK Government rumoured to be considering their own FATCA legislation

8th December 2012

Britain’s overseas territories, including the Crown Dependencies (Jersey, Guernsey & Isle of Man), Gibraltar and the Cayman Islands, are expected to be seeking official confirmation with some urgency of a report that the UK government is planning a ‘son of FATCA’ aimed at obtaining information on all accounts held by British taxpayers.

News of the plans emerged in a report last Friday in International Tax Review (ITR), which said it had seen a copy of a leaked draft of a government document detailing how the scheme would work.

The ITR report referred to the plan as a ‘son of FATCA’ scheme, after the US Foreign Account Tax Compliance Act which demands information of foreign financial institutions on its taxpayers.

“The draft agreement…will require the automatic exchange of information for each reportable account of each reporting financial institution. That would include full details of all beneficial owners of the account, including those whose identities might otherwise be hidden by trusts or companies.

“It will also require the account number, name and identifying number of the reporting financial institution as provided when registering with the IRS for FATCA purposes, and the account balance or value as of the end of the relevant calendar year or other appropriate reporting period or, if the account was closed during such year, immediately before closure.

“The move will deal an almost-fatal blow to tax evasion through the UK’s tax havens”, the ITR report went on, adding that it is “a coup for the Tax Justice Network, which has long been arguing for automatic information exchange”.

Publicly, Government ‘rejected’ need for ‘UK FATCA’

The document seen by ITR appeared to contradict a statement by the Government a couple of weeks back, in which it “publicly rejected the need for a UK version of FATCA” in a response to an International Development Committee report, the ITR noted.

But “in private…the Government has already drafted [this] legislation, which it will impose on its Crown Dependencies and Overseas Territories…[including] Cayman Islands, the Channel Islands and the Isle of Man.”

The ITR said it expected an “autumn” (2013) announcement from the Government, “with the legislation coming into effect on January 1, 2014”.

Little surprise in some quarters

The news will not come as a surprise to some observers, who have seen a global move towards greater willingness on the part of governments – particularly in the wake of the global financial crisis – to cooperate in an effort to boost their tax take from the large number of individuals many governments believe are hiding significant amounts of wealth offshore.

Some 14 months ago, Debbie Payne, a director of tax at PwC in London and an expert on FATCA, told an audience of private equity industry officials that there was “a distinct possibility” that certain European countries would decide to “break away” from the rest of the pack “and bring in their own domestic, FATCA-like regimes”.

She observed that the Americans were surprised at the negative response much of the rest of the world had shown to FATCA, since, she noted, the genesis for the plan had come out of meetings held by the G7 and G8 countries following the financial crisis, and subsequent discussions.

“They’re saying, ‘you were sitting in the same meetings as we were with the OECD, and you didn’t say [at that time that] you couldn’t or didn’t want to comply with this; so why are you getting so concerned when all we are doing is going first?’”