UK FATCA: New Filing Obligations for Overseas Crown Territories

The United Kingdom and its Crown Dependencies, such as the Cayman Islands and the British Virgin Islands, have entered into intergovernmental agreements (“IGA”) to improve compliance with UK tax laws. These new IGAs are popularly referred to as UK FATCA due to their similarity to the United States Foreign Account Tax Act (“US FATCA”).

Pre-existing and new investors, as of July 1, 2014, of funds located in UK FATCA jurisdictions have different obligations. Funds are required to obtain a form of self-certification for new investors. Here are the respective rules:

  • New investors to funds in UK IGA jurisdictions will have to self-certify as either a “Specified UK Person” or a “Passive Non-Financial Foreign Entity.” Specified UK Persons will have additional forms to complete. The Cayman Islands FATCA working group has created forms for the purpose of distribution to investors while funds in other IGA jurisdictions have distributed questionnaires in subscription documents.
  • Funds with pre-existing investors should obtain self-certification forms from their investors. Furthermore, UK FATCA requires that the funds perform an adequate search of possible links to the UK (“UK Indicia”). This search includes looking for UK mailing addresses or UK bank account information. If there is a link, UK FATCA will require the fund to obtain additional information.

New and pre-existing investors also have different timelines for compliance obligations:

  • July 1, 2014: Obtain self-certification from all new investors;
  • June 30, 2015: Complete UK Indicia review for pre-6/1/2014 individuals;
  • May 26, 2016: Report to local tax authority for the 2014 and 2015 calendar years;
  • June 30, 2016: Complete UK indicia review for pre-6/1/2014 entity investors;
  • May 31, 2017: Report to the local tax authority for the 2016 calendar year.

Finally, there are two more important things to note about UK FATCA:

  • Unlike US FATCA, UK FATCA does not have any tax withholding provisions as a consequence of non-compliance. Compliance obligations are only based on the laws and regulations of the UK IGA jurisdiction where the fund is located. Fines and penalties are based on local laws.
  • Investment funds that recognize certain investors as reportable based on UK FATCA will have to do so on an annual basis. This includes a variety of information ranging from the investor’s birthdate to his or her account balances.

UK FATCA is a step in the direction of increased global regulation of financial services on a variety of fronts.  Managers to offshore funds should review the relevant jurisdiction’s websites to stay updated on changes.

Further reading:

The Cayman Islands Tax Information Authority website is a great resource for more information regarding UK FATCA.  More on Cayman is available on Maples & Calder’s website.

Schulte Roth and Zabel’s UK FATCA Alert provides a thorough discussion of requirements.

PwC provides an in-depth discussion of the interaction between FATCA and the UK regime.