International Tax Compliance and the Retail Platform

FATCA (Foreign Account Tax Compliance Act) and Crown Dependency and Overseas Territory (CDOT) exchange of information – what you need to know

What is FATCA?

FATCA is US legislation aimed at reducing tax evasion by US residents and citizens. It requires Financial Institutions outside the US to pass information about US resident and US citizen plan holders to the US tax authorities, the Internal Revenue Service (IRS). Agreement has been reached between the UK and the US, so that UK Financial Institutions will only be required to report FATCA information to Her Majesty’s Revenue & Customs (HMRC), rather than directly to the IRS. HMRC will then liaise with the IRS.

What are the CDOT agreements?

The UK has entered into exchange of information agreements with the Crown Dependencies (Jersey, Guernsey and Isle of Man) and Overseas Territory (Gibraltar). Financial Institutions are required to pass information about tax residents of UK Crown Dependencies and the UK Overseas Territory to HMRC.

When will the changes be made?

FATCA & CDOT regulations come into effect on 1 July 2014 and, we’ll capture specific information on a customer’s tax residency for any new Portfolios activated. Once a year, we’ll report the value of the Cash account and Investment account of any relevant individuals to HMRC, starting in March 2015.

In future, the UK Government may enter into agreements with other countries to share information.

Qs and As

What impact will this have on my customers?

On the Anti-Money Laundering (AML) screen, copy attached for you, there is a new question asking you to confirm whether you have any reason to believe your customer has additional tax residencies, and a free-format box is available to provide details.

Also, there is an additional section on the Portfolio declaration asking your customer to confirm any additional tax residencies.

If the information provided indicates the customer is reportable under FATCA legislation, Zurich will be required to pass the value of their Cash account and Investment account to HMRC once a year, until they either cease to be FATCA or CDOT reportable – i.e. change country of residence, or their Portfolio ends. What impact will this have on customers opening an Investment Account for the first time after 1 July?

The application process is currently unchanged through the platform. However, we’ll write directly to customers asking them to complete a Tax Residency declaration after their account has become active. They will have 30 days to complete and return the declaration to us. If we do not receive it within 30 days then the value of their Cash account and Investment account will become reportable to HMRC on a yearly basis, until we receive confirmation and, in some cases, additional evidence to demonstrate their tax residency.

What about business I’ve started on the Platform but not submitted by 30 June?

If you started a new business wizard on the platform you will still be able to submit that wizard on or after 30 June, but the Portfolio declaration will not include the new Tax Residency declaration.

You should download a standalone Tax residency declaration from the document library and submit that with the declaration.

If a Tax residency declaration is not received we will write directly to your customers giving them 30 days to complete and send in their Tax residency declaration. Failure to submit the declaration within 30 days automatically makes the customer’s Cash account and Investment account reportable to HMRC.

What are we telling your customers about this?

Attached is an outline of the letter we’ll be sending to your customers - where there’s an indication they fall into the FATCA or CDOT legislation and may be reportable.

This letter explains the legislation and invites them to provide evidence to show they are not FATCA reportable.

If the customer doesn’t respond, or provide appropriate evidence within 30 days, we’ll pass their information to HMRC once a year in March, until they either cease to hold Platform accounts, or cease to be reportable.

Does this impact any Trusts held with Zurich?

For private and charitable trusts all trustees must complete a tax declaration. There’s a different declaration for individual and corporate trustees.

These declarations will be available on the platform at the document stage, but they’re not incorporated into the main declaration. These need to be printed separately, although they must be submitted with the declaration. Charitable trusts are not reportable under FACTA, but they’re reportable under the CDOT agreement.

Pension trusts are not within the scope of FACTA or CDOT agreements.

Are there any other occasions when the customer will receive a Tax residency declaration from Zurich?

If a customer informs us of a change of circumstances, for example provides us with a US address, then we will send them a Tax residency declaration to complete. They will have 30 days to return it. Failure to return it within 30 days require us to report the value of the customer’s Cash account and Investment account to HMRC on an annual basis, until such time as they provide us with a completed declaration.