In response to existing stories that many bank and companies in Model 2 jurisdictions have refused to continue business with US-linked customers on account of the increased compliance efforts and costs, he said such institutions simply “do not want their names dragged through the mud”.
“Institutions must make sure they are fully compliant, or even over-compliant,” he said. “With the whole world headed towards the level of exchange seen in FATCA, no institution wants to be known as the one who is not properly compliant.
“Private banks will do compliance for hugely wealthy US-linked clients and will charge a lot, but for smaller US clients, looking to invest a SIPP or an ISA, for example, they may pass on the business. This will provide a lot of opportunity for accountants and smaller niche companies who are willing to take on this responsibility.”
Identify and report
Passed in 2010 by US president Barack Obama and introduced in July last year, FATCA requires foreign financial institutions (FFIs) from around the world to identify and report the financial details of all their American clients, whose tax duties still apply when they move either themselves or their money from the US.
An IGA is an agreement designed to facilitate the exchange of data between an FFI and the IRS by providing advantages such as relaxed deadlines and increased clarity and simplicity around due diligence, with country specific provisions.
Under a Model 2 IGA, which, among others, is held by Japan and Switzerland, an FFI is tasked with gathering information about US customers and providing it directly to the IRS.
A Model 1 IGA, which is held by the majority of compliant countries including the UK and its crown dependencies, requires an FFI to provide US information to its government’s local revenue authority, such as the UK’s HM Revenue & Customs, who then pass it on to the IRS.
The reporting deadline for FFIs in Model 1 jurisdictions to pass information to the IRS is 30 September this year.
Nil reporting is not mandatory from the perspective of the IRS, so FFIs in non-IGA countries with no reportable accounts generally will not need to report details on non-US clients.
Information a FFI must provide on US clients includes their name, their US taxpayer identification number, their address, their account number, and account balance or value.
