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What are the key issues for legal professionals in relation to FATCA?
The key issues for lawyers are two-fold. Firstly, they need to look carefully at any trusts they advise on to determine the status of the trust under the Model 1 intergovernmental agreement (IGA) that the UK has signed for FATCA purposes. They also need to look closely at their own practices, particularly if the firm they are working for has, for example, established a corporate trustee to act as trustee for a client. They will need to determine if that needs to register as a financial institution under FATCA.
What are the most imminent dangers posed by FATCA for professionals?
The deadlines are becoming very pressing. We think that by the end of October 2014 any entity that needs to register as a result of FATCA needs to have done that. Both American and UK tax authorities have indicated that for first 18 months they will operate on the basis that if things have gone slightly wrong then they will be lenient, but it is still putting you at risk of being in breach of UK tax law if you have not fulfilled your obligations. They then need to make sure that they have the systems in place to ensure they can meet the reporting deadlines which come in next spring. You need to be confident that you can report whatever needs to be reported under FATCA.
What are the specific concerns for trustees in relation to FATCA?
There are two major concerns for trustees. Firstly, they need to establish the status of the trust and that could be a relatively complex process—and with that in mind that the Law Society, STEP and the ICAEW have published joint guidance which is widely available on the organisations’ websites.
The second issue is that the trustees need to make sure that they have the necessary information from settlors and beneficiaries so that they can fulfil their own reporting obligations – and that could be a lengthy process in relation to a trust if, for example, there are a lot of widely-spread beneficiaries.
Should trustees be taking any action at this stage?
Yes, all the professional bodies are stressing, particularly with an eye on their registration obligations, the requirement to ascertain does a trust need to register and does a corporate trustee need to register. Making sure that you have all the information that you need is not a huge task, but it needs to be done. Then you need to register, which you have to do via the American IRS’s website and we recommend you do that by the end of October.
How can professionals prepare for the ongoing obligations under FATCA?
As for the ongoing obligations to continue reporting, FATCA is wholly focused on US taxpayers, but 18 months after FATCA the UK and other jurisdictions are committed to adopting the OECD common reporting standards and that will require you to find and report information on taxpayers from almost any jurisdiction. So professionals need to make sure that systems are robust enough not just to cope with finding US citizens and reporting on them but on finding any taxpayers from outside the UK and being able to give HMRC the necessary information to report on them too.
George Hodgson, head of policy at STEP (Interviewed by Jon Robins.)
The views expressed by our Legal Analysis interviewees are not necessarily those of the proprietor.
First published on Lexis®PSL.
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