Trusts & FACTA

9th October 2014

Alert to ALL UK trustees: Registration may now be urgently required with the IRS.
FATCA – the Foreign Account Tax Compliance Act – is US legislation aimed at reducing tax evasion by US citizens. It requires financial institutions outside the US to provide certain information about US customers to the IRS. A 30% withholding Tax will be applied to any US income where the compliance obligations are not met – I understand that this will include the proceeds of sale of any US investments.

ALL UK TRUSTS are unfortunately caught be these rules, whether or not they have any US connections, and action is required by 25 October 2014.

In the main, only Trusts with an actively managed investment portfolio will be required to register with the IRS. HMRC up-dated their guidance on 28 August 2014 (in a document that runs to 181 pages), but the procedures involved are still evolving.

Investment managers can deal with FACTA compliance on the trustees’ behalf, but we are aware of a number who are declining to do so. And the legal obligation to comply lies with the trustees.
It is tempting to assume that none of this will apply where there is no US income. With a diverse investment portfolio, that will be rare anyway but having in mind how aggressive the IRS are, trustees must give attention to this. There are, of course, penalties for non-compliance.

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