First the good news (the metaphorical cherry on the top?)
- The guidance (at 2.9) confirms that the phrase “reporting or withholding requirements” includes both chargeable events reporting and taxation under the I – E regime. This is helpful for the Local Client Base exemption and should remove insurers from the requirements for back book due diligence.
- Products purchased by individuals with funds from a Registered Pension Scheme (RPS) will be exempt products. Although perhaps the guidance needs further simplification? We are feeding back on this to HMRC.
There are still areas of uncertainty, both technically and operationally, and companies should participate in the consultation that is open until 13thFebruary 2013. For example:
- Are pension trustee companies Financial Institutions (FIs)? This impacts the information gathered from such entity policyholders and whether all FIs in your group have been identified.
- Other Trust or Company Service Providers are FIs. Are any such policyholders non-UK or non-Partner Jurisdiction resident?
- How are unauthorised payments from RPSs to be dealt with?
Companies have until 31st May 2015 to decide whether to make the election to complete certain due diligence exercises. It is not yet clear whether:
- it is one election to exclude 31 December 2013 individual accounts (Annex I.II.A.3), post 31 December 2013 individual accounts with a value less than $50k at the reporting date and 31 December 2013 low value entity accounts until a value of $1m is achieved,
OR
- Three separate elections so that companies can choose which exclusion to apply for.
The guidance suggests the latter, which would be welcome as companies may prefer, from a controls perspective, to report all reportable new accounts but exclude the back book entirely. This should be clarified in the consultation.
- Participate in the consultation process highlighting:
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- problem areas, and suggesting alternative interpretations of the IGA (as the IGA cannot be changed), quantifying the impact for your group/company, if possible.
- there should be three elections not one.
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- Consider whether the proposed annual reporting date of 31 May is feasible.
- If policies are written in trust or sold for IHT planning, consider how to ensure all trust or company service provider policyholders have registered with the IRS before 2015, when non-participating FIs have to be reported.
- Start designing operational controls that demonstrate compliance with the regulations.
- Identify a Responsible Officer for the FIs that are not Non-Reporting FIs. These FIs will have to report, even if it is a nil return if there are no reportable Financial Accounts.
- Based on the guidance at 2.9, consider whether the requirements to be a company/group with a Local Client Base are satisfied.
- Monitor which countries have IGAs and which products are included in their Annex II (and the interpretation there-of) and the impact on the current and proposed international operations of the group.
If you would like to discuss the implementation of the IGA, please contact either your usual KPMG contact or Jeanette Cook (0117 905 4277).
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