# UK FATCA-related impact statement



## iota2014

*"Tax administration: regulations to implement the UK's automatic exchange of information agreements"*

https://www.gov.uk/government/uploa...76/TIIN_8148_tax_admin_automatic_exchange.pdf

Two statements of particular interest, p.3, Summary of Impacts:



> This measure is not expected to impact upon tax compliant individuals, households, or family formation or stability.


Really? Tax-compliant non-US spouses of US citizens may find that their accounts jointly held with their spouse are now reportable to the IRS. Tax-compliant UK-resident USCs may find certain accounts no longer available to them.



> There are no impacts on any groups which share a protected characteristic.


Really? US-born non-US-citizens may find their accounts treated as reportable to the IRS. Non-US-born non-US-citizens will not. Discrimination on the basis of national origin falls under the protected characteristic of race. (Of course it's not the same as race, but that's the way it's categorized under UK law.)

Perhaps worth raising with one's M.P.


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## KristenJune

Does this mean that all UK and non UK persons resident in the UK have to report all foreign financial accounts held overseas to HMRC and
does it mean that US financial institutions are required to report all UK foreign accounts held in the USA to HMRC?


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## Bevdeforges

KristenJune said:


> Does this mean that all UK and non UK persons resident in the UK have to report all foreign financial accounts held overseas to HMRC and
> does it mean that US financial institutions are required to report all UK foreign accounts held in the USA to HMRC?


The OECD regulations are supposed to require all banks to report accounts held by non-residents to the banking authority (or tax authority) of the account holders' country of residence. FATCA requires that all banks outside the US report accounts held by "US persons" ( i.e. citizens or permanent residents) to the IRS - usually through the national bank or banking authority.

To be honest, the US doesn't actually report non-resident accounts back to the country of residence - and that has been a bone of contention in all this "foreign bank account" stuff for a long time.
Cheers,
Bev


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## iota2014

KristenJune said:


> Does this mean that all UK and non UK persons resident in the UK have to report all foreign financial accounts held overseas to HMRC and
> does it mean that US financial institutions are required to report all UK foreign accounts held in the USA to HMRC?


It's a real headache trying to get this legislative mishmash straight. As I understand it:

The document I quoted from (https://www.gov.uk/government/uploa...76/TIIN_8148_tax_admin_automatic_exchange.pdf) assesses the impact of the FATCA and /DAC-CRS regulations.

The FATCA/CRS/CDOT regulations ( International Tax Compliance Regulations 2015, Statutory Instrument 2015/878 http://www.legislation.gov.uk/uksi/2015/878/pdfs/uksi_20150878_en.pdf) put into effect the measures set out in: (a)the FATCA IGA, (b) the OECD Common Reporting Standard, and (c) the EU DAC (requiring EU member countries to implement CRS) 

The FATCA IGA requires UK Financial Institutions to report accounts held by US persons (whether UK-resident or not) to HMRC, and HMRC forwards the reports to the IRS. The US reciprocates by sending some limited information on (some) accounts held by UK residents in the US.

The OECD CRS requires UK Financial Institutions to report accounts held by anyone resident or tax-resident in another jurisdiction to the tax authority in that jurisdiction.

In brief - the FATCA IGA and the OECD CRS are both implemented by the Regulations, and the impact of the Regulations is assessed in the Impact Statement.

The Impact Statement seems to me to have overlooked the impact of the Regulations on some tax-compliant UK resident US cirizens and non-US citizens. That's what I think might be worth drawing to the attention of one's M.P.

-


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## iota2014

In addition, there is the HMRC AEOI Guidance Manual: 

https://www.gov.uk/hmrc-internal-manuals/international-exchange-of-information

and as I mentioned before, STEP's very useful reference document.

http://www.step.org/sites/default/files/Policy/HMRC_International_Exchange_of_Information_Manual.pdf


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## iota2014

Bevdeforges said:


> The OECD regulations are supposed to require all banks to report accounts held by non-residents to the banking authority (or tax authority) of the account holders' country of residence.


As I understand it, CRS requires FIs to report accounts to the jurisdiction(s) in which the accountholder is resident for tax purposes. Most people, other than US citizens, are only tax-resident in their country of residence, but as I understand it, it is possible for a non-US-citizen to be tax-resident in more than one country. And definitely possible for non-doms living in the UK and holding UK accounts to be tax-resident elsewhere.


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## JustLurking

iota2014 said:


> Perhaps worth raising with one's M.P.


I did raise _precisely_ the two points you mention with my MP, over eight separate communications spanning a period from 2 Oct to 17 Nov 2014. He shuttled messages between me and the Exchequer Secretary to the Treasury, but otherwise took no action.

Treasury's response in all cases was merely a variant on "drop dead". Their exact words: "_It is a matter for the US as to how they tax US citizens._" The argument, as ever, was that it was too expensive _not_ to cave in to FATCA, and the IGA is justifiable because it is the cheaper alternative.


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## iota2014

JustLurking said:


> I did raise _precisely_ the two points you mention with my MP, over eight separate communications spanning a period from 2 Oct to 17 Nov 2014. He shuttled messages between me and the Exchequer Secretary to the Treasury, but otherwise took no action.
> 
> Treasury's response in all cases was merely a variant on "drop dead". Their exact words: "_It is a matter for the US as to how they tax US citizens._"


That's interesting. Presumably that was in response to the first point - "no impact on the tax-compliant"? It doesn't answer the second point (the impact on a person who is *not* a US citizen but has a US birthplace). Perhaps they just chose to answer the question they wanted to answer rather than the question that was asked. Typical. 

It doesn't necessarily mean writing to one's M.P. is a waste of time, though. They'll probably be keeping track of what issues are raised by constituents, if only to be aware of what might turn up in the courts. Is my guess. And there have been significant changes since 2014, with regard to politics (Osborne gone, Brexit looming, minority government), AEOI (CRS), and data protection.



> The argument, as ever, was that it was too expensive _not_ to cave in to FATCA, and the IGA is justifiable because it is the cheaper alternative.


That's an argument I agree with. Naked FATCA would be much worse for all of us than IGA FATCA.


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## Bevdeforges

iota2014 said:


> It doesn't answer the second point (the impact on a person who is *not* a US citizen but has a US birthplace).


Actually anyone with a US birthplace IS (technically, legally) a US citizen, with the one, limited exception of a child born in the US to diplomatic parents. However, the enforcement of tax and FATCA obligations on these "accidental" Americans is pretty limited. As is the enforcement of the whole thing on those born overseas, but with one or both parents able to pass on their US citizenship. It's not an option - though it's much easier to conceal (or just forget about) than the various other ways of becoming a US citizen.
Cheers,
Bev


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## iota2014

Bevdeforges said:


> Actually anyone with a US birthplace IS (technically, legally) a US citizen, with the one, limited exception of a child born in the US to diplomatic parents.


Those of us who have renounced are not.


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## Bevdeforges

iota2014 said:


> Those of us who have renounced are not.


And in that case, the banks are still obligated to ask you about your status - and to require you to produce a CLN to "prove" it. So, to a certain extent, those with a US birthplace are still required to comply with FATCA if only to show proof if it doesn't apply to them. (Pretty much the same as the situation of the diplomat's kids.)
Cheers,
Bev


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## iota2014

Bevdeforges said:


> And in that case, the banks are still obligated to ask you about your status - and to require you to produce a CLN to "prove" it.


That's not correct. The UK regulations don't require the banks to apply the "cure" for a US birthplace - at least, nowhere that I can see.



> So, to a certain extent, those with a US birthplace are still required to comply with FATCA if only to show proof if it doesn't apply to them.


Obviously all accounts are subject to due diligence. The issue is that those with no indicia cannot be required to supply a US TIN and treated as reportable; but those with a US birthplace can, even if they're not a US citizen.


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## iota2014

I said:



> The issue is that those with no indicia cannot be required to supply a US TIN and treated as reportable; but those with a US birthplace can, even if they're not a US citizen.


Correction - the banks can't actually _report_ the account of a non-US-citizen born in America, because the IGA doesn't give them data protection cover to do that; they can demand the US TIN, and close the account if it's not forthcoming.

That's why the impact statement is interesting. The legislation may or may not infringe on the US-born non-US-citizen's equal rights - that would have to be settled in court - but it certainly does seem to have an impact on a particular group defined by national origin.

It may be that if drawn to the attention of the law writers, the legislation might eventually get adjusted to require the banks to apply the cure. That would be the best solution, IMO.


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## iota2014

Bevdeforges said:


> Actually anyone with a US birthplace IS (technically, legally) a US citizen, with the one, limited exception of a child born in the US to diplomatic parents. However, the enforcement of tax and FATCA obligations on these "accidental" Americans is pretty limited. As is the enforcement of the whole thing on those born overseas, but with one or both parents able to pass on their US citizenship. It's not an option - though it's much easier to conceal (or just forget about) than the various other ways of becoming a US citizen.


As far as I'm aware, UK AEOI legislation would not allow a bank to treat an account with no indicia as reportable to the IRS merely because of a parent's US citizenship.

As to whether the child of a USC parent is or is not a US citizen - it's not some essentialist "thou art and ever shalt be" congenital disease that you don't have an option to refuse. Of course you can refuse, children of USC parents, The US can't impose US eternal-tax-paying citizenship on you - you don't have anything to conceal, and don't need to lie.


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## iota2014

*UK Dual Nationality*

UK passports issued in 2007 had a note "Dual Nationality", which stated, in part:


> British nationals who are also nationals of another country cannot be protected by HM's representatives against the authorities of that country. If, under the law of that country, they are liable for any obligation (such as military service), the fact that they are British nationals does not exempt them from it.


In UK passports issued in 2017, the notes have been rewritten. Note 3 is labelled "Consular Assistance", and states:


> A British citizen who holds dual citizenship (also known as dual nationality) cannot get diplomatic help from the British government while they are in the other country where they hold citizenship. A person who has dual nationality may be subject to the laws of the other country. It is your responsibility to determine what responsibilities you may have with that other country.


I'd be interested to know when the wording was changed.


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## Bevdeforges

I don't see anything like that in my current (soon to expire) US passport, but I can assure you that there was a very similar sign posted prominently in the US Consulate in Paris the last time I was in there (which has to be almost 20 years ago now - well before FATCA was even an evil twinkle in a politician's eye). I believe it is a long-standing "rule" that no consulate can do much of anything for a dual national in one of their "home" countries.
Cheers,
Bev


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## iota2014

Bevdeforges said:


> I don't see anything like that in my current (soon to expire) US passport, but I can assure you that there was a very similar sign posted prominently in the US Consulate in Paris the last time I was in there (which has to be almost 20 years ago now - well before FATCA was even an evil twinkle in a politician's eye). I believe it is a long-standing "rule" that no consulate can do much of anything for a dual national in one of their "home" countries.
> Cheers,
> Bev


Bev, my question is about UK passports, not US passports.


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## iota2014

For what it's worth, for a US citizen residing in the US or the UK, the question of consular assistance with regard to FATCA does not arise.

If resident in the US, the person is subject to US law, regardless of nationality; if resident in the UK, the person is subject to UK law, regardless of nationality. Since FATCA rules are law in both countries, a US citizen has no recourse to diplomatic protection with regard to FATCA. Q.E.D.

It's not the consular assistance aspect that's of interest to me; it's the final sentence of the rewritten UK passport note:


> It is your responsibility to determine what responsibilities you have with that other country.


As HMG appear to have handed that responsibility to the banks, without sufficient safeguards for the rights of the individual concerned. 

For example, in the case of a pre-existing account held by a US-born individual, banks are free to report the account, or seek self-certification and act accordingly, or close the account; in the case of a US-born individual seeking to open an account, banks are free to refuse, or seek self-certification and act accordingly.

Whereas, taking the sentence from the passport notes at face value, it appears to me it could perhaps be argued that a US-born person who satisfies the conditions for relinquishment of US citizenship, and considers herself to have relinquished US citizenship, is entitled to answer "no" to the question "Are you a US citizen", without being forced to buy a CLN.

Of course I'm not a lawyer and may very well be wrong. We'll see. It would be helpful to know when the sentence first appeared in the *UK* passport, if any *UK* passport holders are reading.


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## Bevdeforges

iota2014 said:


> Bev, my question is about UK passports, not US passports.


Yes, but my initial reaction was that I have seen this exact statement with regard to US citizens somewhere - and checked my passport first. It's pretty much standard policy at most consulates these days, I believe.
Cheers,
Bev


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## iota2014

Bevdeforges said:


> Yes, but my initial reaction was that I have seen this exact statement with regard to US citizens somewhere - and checked my passport first. It's pretty much standard policy at most consulates these days, I believe.
> Cheers,
> Bev


Could you please clarify that? Do you mean that you've seen a statement saying:


> A US citizen who holds dual citizenship (also known as dual nationality) cannot get diplomatic help from the US government while they are in the other country where they hold citizenship. A person who has dual nationality may be subject to the laws of the other country. It is your responsibility to determine what responsibilities you may have with that other country.


...including that final sentence? That would be a little weird, since using the same exact wording would imply that the US and the UK agreed the wording.

Or do you just mean that you've seen statements in US passports/consulates about dual citizens not being entitled to US consular assistance against the other country of citizenship?

That fact is not in doubt, as I've said. It's the final sentence of the *UK* passport note I'm interested in.


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## Bevdeforges

No, the wording is not precisely the same, but the idea is the same. IIRC, the sign in the US Consulate said something like, the Consulate cannot intervene in matters (maybe the word was "interfere") involving dual nationals in the country of their other nationality. In fact, I believe they also mentioned that they cannot intervene in matters related to visa issues for US citizens in a country where they hold a long-stay visa. So it's not just dual nationals.

And when the US didn't admit to "tolerating" dual nationality, I believe the passport did include something much like that last sentence - basically, we don't really acknowledge dual nationality, but just be aware that, it's on you to find out about any requirements your "other" country has for you. The main concern at the time was the draft because that's when serving in any foreign military was considered an "expatriating act." 

The Wikipedia article on Multiple citizenship is interesting in this regard: https://en.wikipedia.org/wiki/Multiple_citizenship
Cheers,
Bev


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## iota2014

Thanks for clarifying, Bev. The issue I'm interested in is to do with the UK government position - not US. The two governments very likely do have similar positions on these issues, but for UK residents it's the UK government's position that has primary importance - not the position of the US government.

I'm in no doubt that the US doesn't take any interest whatsoever in a US resident's obligations to another country. The situation is rather different for the UK, which like many other countries has deliberately changed its own laws specifically in order to incorporate US law requiring banks to identify those of us with US place of birth, and treat us as US citizens subject to US tax law, unless we can prove we are _not_ US citizens.

The place of birth is immutable - which raises the question of discrimination by national origin. The citizenship is _not_ immutable, which raises the question of the extent to which HMG is prepared to require a UK resident/citizen to incur onerous costs to prove non-citizenship of another country.

Both these questions seem to me to be worth exploring. I'd be glad to hear from any UK passport holders which version of the notes their current UK passport has got, plus year of issue.


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## Moulard

I don't believe it is about the UK resident/citizen incurring anything to prove non-citizenship of another country.

If a country takes you to be their citizen, according to their laws and you are in that country, it is exceedingly common for local authorities to rebuff any consular approach as it is deemed a "domestic matter". 

I think the wording change on the UK passport makes that much clearer. Far better to have it printed there than on some brochure that no-one ever reads.


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## iota2014

As I've said: the issue I'm interested in is not to do with consular access.

It's surely obvious that dual US/UK citicens resident in the UK can't appeal to the UK or the US diplomatic service for protection against the enforcement of the UK IGA, which is UK law; equally, it's surely obvious that dual US/UK citizens resident in the US can't appeal to the US or the UK diplomatic service for protection against the enforcement of FATCA, which is US law. It's a non-issue.

It's the final sentence of the note which interests me, for the reasons I've explained. Given that it's a UK passport note, it probably isn't of interest for anyone who's not a UK citizen.


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## celticweb

iota2014 said:


> .
> 
> I'd be glad to hear from any UK passport holders which version of the notes their current UK passport has got, plus year of issue.


A UK passport issued in April 2011 has the old version of the dual citizenship message

starting with the paragraph "British nationals who are also nationals of another country cannot be protected by HM's representatives against the authorities of that country. If, under the law of that country, they are liable for any obligation (such as military service), the fact that they are British nationals does not exempt them from it. "

so the change must have happened any time after 2011. 
Hope this helps Iota.


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## iota2014

celticweb said:


> A UK passport issued in April 2011 has the old version of the dual citizenship message
> 
> starting with the paragraph "British nationals who are also nationals of another country cannot be protected by HM's representatives against the authorities of that country. If, under the law of that country, they are liable for any obligation (such as military service), the fact that they are British nationals does not exempt them from it. "
> 
> so the change must have happened any time after 2011.
> Hope this helps Iota.


Thanks, celticweb, it does! 

The Joint Statement (https://www.gov.uk/government/news/...ational-tax-compliance-and-implementing-fatca) was issued 8 Feb 2012. 

So at the time the wording of that note was changed, FATCA/IGA was either in effect or on the horizon. Which means it might have been a factor which influenced the language used in the re-draughting of that CYA note. 

I will do some more digging.


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## celticweb

iota2014 said:


> Thanks, celticweb, it does!
> 
> The Joint Statement (https://www.gov.uk/government/news/...ational-tax-compliance-and-implementing-fatca) was issued 8 Feb 2012.
> 
> So at the time the wording of that note was changed, FATCA/IGA was either in effect or on the horizon. Which means it might have been a factor which influenced the language used in the re-draughting of that CYA note.
> 
> I will do some more digging.


I think Fatca most likely had an influence on the wording of language. The issue with the Americans overseas whose private financial information is subject to disclosure to the government is only an issue because of the CBT. Otherwise it would be aimed at the right people, those residing in the USA or who are US tax residents for real. 

It's the CBT that is at the root of all problems. Take the CBT away and some problems will go away immediately.


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## iota2014

celticweb said:


> I think Fatca most likely had an influence on the wording of language. The issue with the Americans overseas whose private financial information is subject to disclosure to the government is only an issue because of the CBT. Otherwise it would be aimed at the right people, those residing in the USA or who are US tax residents for real.
> 
> It's the CBT that is at the root of all problems. Take the CBT away and some problems will go away immediately.


I question whether UK FIs would ever be able (or willing) to drop the US citizenship question, regardless of any changes to the US tax code.

It would be nice to see HMG take responsibility for the due diligence checks, instead of leaving us at the mercy of the banks; we'd then have a right to challenge.

Not likely to happen though.


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## Bevdeforges

The other thing is that FATCA and FATCA compliance is directed at the Financial Institutions (i.e. their right to do business in the US), not with the various governments who have "volunteered" to act as a conduit for the FATCA reporting information by the FIs. Probably has something to do with the notion that this was supposed to be an "exchange" of information - which it hasn't really turned out to be.
Cheers,
Bev


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## iota2014

Bevdeforges said:


> The other thing is that FATCA and FATCA compliance is directed at the Financial Institutions (i.e. their right to do business in the US), not with the various governments who have "volunteered" to act as a conduit for the FATCA reporting information by the FIs.


The IGA unfortunately does much more than provide for HMRC to pass accountholders' information to the IRS: it incorporates (modified) FATCA compliance rules into UK law. Moreover, CRS/CDOT/DAC have now been added to the mix, requiring banks to document the tax-residenc(ies) of *every* accountholder. The result is that any indication that an accountholder may be tax-resident in another jurisdiction - such as a US place of birth - is likely to lead to the account being flagged.

And this would still be the case, even if FATCA and/or CBT were to be repealed altogether.

It's not a serious problem. Annoying though.


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## Bevdeforges

To be honest about, tax evasion and money laundering is a worldwide issue/problem - not just a US one. It was the OECD that was first pushing for a global exchange of information and the ever-popular Know Your Customer rules for the banks and other FIs. The US just decided to jump on it and do things "their own" way with no regard for what any other country might need or want.
Cheers,
Bev


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## iota2014

Bevdeforges said:


> To be honest about, tax evasion and money laundering is a worldwide issue/problem - not just a US one.


Of course. The problem I'm referring to is not about tax evasion, it's about the mis-identification of US-born UK accountholders as tax-resident in another country, purely on the basis of place of birth.


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## iota2014

iota2014 said:


> *US-born non-US-citizens may find their accounts treated as reportable to the IRS. Non-US-born non-US-citizens will not. Discrimination on the basis of national origin falls under the protected characteristic of race. (Of course it's not the same as race, but that's the way it's categorized under UK law.)
> 
> Perhaps worth raising with one's M.P.*


*

And/or one's MEP.

Article 8 of the EU Charter of Fundamental Rights states:



1. Everyone has the right to the protection of personal data concerning him or her.
2. Such data must be processed fairly for specified purposes and on the basis of the consent of the person concerned or some other legitimate basis laid down by law. Everyone has the right of access to data which has been collected concerning him or her, and the right to have it rectified.
3. Compliance with these rules shall be subject to control by an independent authority.

Click to expand...

EUR-Lex - 12012P/TXT - EN - EUR-Lex

HMRC's AEOI Manual requires banks to report US-born customers; the bank is permitted to give the US-born person a chance to prove their innocence, but is not required to do so. The result seems to me to be that the IGA has stripped renunciant EU residents of their right to the protection of personal data.

London renunciants might particularly want to write to Claude Moraes MEP. Mr Moraes is Chair of the EU LIBE Committee (Committee on Civil Liberties, Justice and Home Affairs, and wrote in that capacity to the Chair of the Committee on Petitions requesting that Petition 1088/2016 be added to the agenda for the next meeting of the Petitions Committee. Which it duly was. 




Mr Moraes' letter can be seen at http://www.emeeting.europarl.europa.../PETI/DV/2017/07-10/LIBE_FATCA_1088-16_EN.pdf*


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