FATCA in the UK—loan agreements and the UK:US IGA
Produced in partnership with Sarah Gabbai of McDermott Will & Emery
FATCA in the UK—loan agreements and the UK:US IGA

The following Tax guidance note Produced in partnership with Sarah Gabbai of McDermott Will & Emery provides comprehensive and up to date legal information covering:

  • FATCA in the UK—loan agreements and the UK:US IGA
  • Background to FATCA
  • How FATCA can affect loan agreements
  • FATCA reporting and information obligations
  • FATCA withholding generally
  • Situations where there should be no FATCA withholding risk
  • FATCA withholding where there is an IGA
  • FATCA withholding—Model 1 intergovernmental agreement
  • FATCA withholding—Model 2 intergovernmental agreement
  • FATCA withholding—no intergovernmental agreement
  • more

This Practice Note provides a broad overview of the application of the Foreign Account Tax Compliance Act (FATCA) to loan agreements in the United Kingdom (UK).

For a general overview of:

  1. the Intergovernmental Agreement (IGA) between the UK and the US (the UK:US IGA), and

  2. International Tax Compliance Regulations 2015, SI 2015/878 (the UK Regulations)

see Practice Note: FATCA in the UK—the UK:US Intergovernmental Agreement—an outline.

Other aspects of FATCA as it applies in the UK are explored in more detail in Practice Notes:

  1. FATCA in the UK—funds and the UK:US IGA, and

  2. FATCA in the UK—employee incentive arrangements and the UK:US IGA

Background to FATCA

FATCA is so-called because it derives from the Foreign Account Tax Compliance provisions in the United States HIRE Act 2010.

The main FATCA provisions are now contained in Chapter 4 of Subtitle A of the US Internal Revenue Code (the Code).

The aim of FATCA is to deter and reduce tax evasion by US taxpayers using foreign (ie non-US) accounts to hide income and assets from the Internal Revenue Service (the IRS).

Broadly, FATCA requires financial institutions (FIs) (as defined by FATCA) outside the US (ie foreign financial institutions (FFIs)) to report to the IRS information on their US account holders.

If the financial institution fails to comply with the FATCA reporting requirements, it can, depending on the jurisdiction in