HMRC has issued an update on the Foreign Account Tax Compliance Act (FATCA). In the update they highlight that FATCA is part of the US Hiring Incentives to Restore Employment Act of 2010. It aims to 'combat tax evasion by US tax residents using foreign accounts. It includes certain provisions on withholding taxes and requires financial institutions outside the US to pass information about their US customers to the US tax authorities, the Internal Revenue Services (IRS). Failure to meet these new reporting obligations would result in a 30% withholding tax on the financial institutions.'
To provide background the update highlights that 'FATCA provisions impose new and substantial burdens on UK businesses in identifying US taxpayers, and registering and reporting information to the IRS. Significantly for UK institutions the Data Protection Act precludes UK businesses from passing the required information to the US.' It then highlights that since the original agreement sections have been updated, the most recent in July. This update has resulted in deadlines being pushed back 6 months which means that there will be no reporting for 2013.