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International agreements to improve tax compliance

The government (along with France, Germany, Italy, and Spain) and with the support of the European Commission took part in joint discussions with the US government to explore an intergovernmental approach to FATCA (The Foreign Account Tax Compliance Act,  a USA piece of legislation), supporting the overall aim to combat tax evasion, while reducing risks and burdens on financial institutions. A model intergovernmental agreement (IGA) was developed and published in July 2012.

Tonmoy Kumar, Manager of the Accounts Department of ABDS comments:
“The Foreign Account Tax Compliance Act (FATCA), which is part of the US Hiring Incentives to Restore Employment Act of 2010, aims to combat tax evasion by US tax residents using foreign accounts. The UK and the US subsequently signed an IGA - the 'UK-US Agreement to Improve International Tax Compliance and to Implement FATCA'.”

The IGA reduces some of the administrative burden of complying with the US regulations, and provides a mechanism for UK financial institutions to comply with their obligations without breaching the data protection laws. Under the IGA, financial institutions pass information to HM Revenue & Customs (HMRC) who will then automatically exchange this information with the American Internal Revenue Services (IRS).

The IGA has changed since it was signed, in that Annex II has been updated by a mutual agreement entered into between the competent authorities of the UK and the US. The changes result in a wider scope of institutions and products effectively exempt from the FATCA requirements, and provide greater clarity on the categories of institutions which will be non-reporting UK financial institutions that are treated as deemed-compliant under the IGA.

If you need any help and advice for your business on Tax Relief or Corporation Tax, contact Lavinia Newman, Stuart Coleman or Tonmoy Kumar to discuss how ABDS can help

ABDS Chartered Certified Accountants of Southampton.
Tel: 023 8083 6900  E-mail: abds@netaccountants.net

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