In Uncle Sam’s Footsteps

When FATCA was signed by Barack Obama in 2010, many commentators were quick to argue that such 'breathtakingly extra-territorial' provisions would never come to fruition. Fast-forward only a few years and those five letters, FATCA, have become etched in the minds of exasperated US taxpayers (many of whom are queuing outside embassies around the globe to return their passports) and left financial institutions worldwide having to deal with the ultimate compliance nightmare.

Nevertheless, what has now become clear is that a strong precedent was set four years ago and countries are now following suit in this move from the traditional exchange of information 'on request' to a new era of automatic exchange of data.

It is in this context that the UK has embraced the US FATCA approach but targeting specific jurisdictions. The UK has entered into a number of automatic disclosure of information agreements with the Crown Dependencies and the British Overseas Territories, traditional offshore banking centres. These agreements have quickly been collectively rebranded as 'UK FATCA' or 'Mini FATCA'. At the time of writing, reciprocal agreements have been entered into with the Isle of Man, Jersey, Guernsey and Gibraltar, whilst non-reciprocal agreements have been signed with Cayman, Bermuda, Montserrat, Turks and Caicos, British Virgin Islands and Anguilla.

With these agreements, an ever more stretched HM Revenue & Customs (HMRC) is delegating the role of 'fiscal police' to foreign financial institutions, entrusting them with the task of undertaking a careful due diligence to identify any so called 'reportable accounts' - that is any account where the account holder is either a UK resident individual, partnership or unlisted company (in FATCA talk, a 'UK specified person') or a non-UK entity 'controlled' by a UK specified person (by way of example, this will include settlors, trustees, protectors and beneficiaries of trusts) - and provide extensive information about these accounts and their owners/beneficiaries.

Tax authorities in the Crown Dependencies will have up to 30 September 2016 to exchange information with HMRC for years 2014 and 2015.

Resident Non Domiciled individuals are not exempt from the new disclosure obligations and might feel that their cherished privacy about their offshore affairs is being dented.

Nevertheless, HMRC has not done away completely with the favourable treatment of so called 'res non doms' and has introduced an alternative...

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