There is a more focussed list of Financial Accounts outside the scope of FATCA including:
- All registered pension schemes (RPSs),
- Pension Lifetime Annuities,
- Tax favoured saving products such as ISAs and CTFs, and
- We understand that HMRC are considering whether other products should be Exempt Financial Accounts, although this may not be clarified until the UK legislation implementing FATCA and the associated guidance notes are released.
As protection assurance products and property and casualty insurance with a Cash Value (i.e. surrender value) less than $50,000 were already out of scope, it seems as if the products in scope are more aligned with the IRS aim of identifying US tax evaders.
The good news continues!
Annex II also details entities that are Non-Reporting Financial Institutions which includes entities that have, and will maintain, a local client base. After
- a due diligence exercise to identify that there are no US Reportable Accounts,
- adopting procedures to ensure that products are not sold to US Reportable Account holders, and
- certifying to HMRC that this is the case
there is no need to report anything to HMRC.
If the insurer does not sell “Cash Value Insurance Contracts” or investment linked, transferrable or short term Annuity Contracts, or pay interest on client money accounts then it is probable that the entity is a Non-Financial Foreign Entity (NFFE).
Such a company will be required to certify that it is a Passive NFFE, which could involve completing an IRS W8 form. There is no reporting required to HMRC.
Due diligence is required on the products in-force at 31st December 2013 to identify any Specified US Persons, a Non-US entity with Controlling Persons that is a Specified US Person.
However, if the company is currently not authorised to sell products to US residents and
- either reports to HMRC either under the chargeable events regime or the qualifying policy regime, or
- “withholds” policyholder tax under the I-E regime
Then these products are not in-scope of a due diligence exercise as set out in Annex I.
The priorities should be to:
- Confirm the IGA classification of each entity in the group. In order to do this you need to understand whether the insurer writes any Financial Accounts.
If it does write Financial Accounts and do not have a local client base:
- update your on-boarding procedures to ensure you are capturing the required information to report to HMRC, and
- participate in the consultation on the implementation of the IGA in the UK.
Should you have any questions on how your business might be affected, or require assistance with your FATCA project, please contact your usual KPMG contact or Jeanette Cook.
IN COMPLIANCE WITH US STANDARDS OF TAX PRACTICE PRESCRIBED BY THE US TREASURY THAT APPLY TO ALL US TAX ADVISERS, PLEASE BE ADVISED THAT ANY US TAX ADVICE IN THIS COMMUNICATION IS NOT INTENDED OR WRITTEN BY KPMG TO BE USED, AND CANNOT BE USED, BY A CLIENT OR ANY OTHER PERSON OR ENTITY FOR THE PURPOSE OF (i) AVOIDING PENALTIES THAT MAY BE IMPOSED ON ANY TAXPAYER OR (ii) PROMOTING, MARKETING OR RECOMMENDING TO ANOTHER PARTY ANY MATTERS ADDRESSED HEREIN.