A BILATERAL AGREEMENT intended to secure information on tax dodgers and stem tax evasion has been signed by the US and UK.
The Foreign Account Tax Compliance Act (FATCA) is a US 2010 law designed to target people using foreign accounts or foreign entities in which American tax payers hold a significant stake.
Under the agreement, banks will pass information on American account holders through their own governments instead of directly to the US government. A requirement to withhold 30% tax on US-source income will be imposed if a financial institution should fail to disclose information.
But financial institutions around the world expressed concerns over the potentially burdensome nature of the measures, particularly over costs associated with compliance and penalties incurred in cases of non-compliance.
The US-UK agreement is the first to come out of discussions with the US and could be used as a template to establish a common model by which FATCA could be best operated among other countries.
The deal will work on a reciprocal basis, with the US to increase the amount of interest it collects, which it will then share with the UK when it concerns UK residents.
Having signed the agreement on behalf of the UK, Exchequer secretary to the Treasury David Gauke (pictured) said: “It is the first [agreement] of its kind and represents a significant step forward in the scope and nature of information exchange between governments. Furthermore, the changes we have achieved to FATCA implementation will provide significant benefits to UK financial institutions.”
The document will now be scrutinised by parliament as part of the ratification process, before financial institutions and other parties are consulted. Draft legislation will published later this year.
HMRC compliance crackdown targets SMEs, resulting in £468m for year ending 31 March 2016
Report argues that the government must change the way it makes tax and budget decisions
Committee expresses concern about costs to businesses and April 2018 implementation date
Andrew Tyrie airs views on the Finance Bill, 'Making Tax Policy Better' report, and Brexit