limey69

Having done some reading and ruminations on this...I'd like to see if anyone has thoughts, comments etc on my comments.

Won’t the sheer mass of information coming the way of the IRS from the FFI’s serve to undermine their efforts to identify the real abusers of the systems? The IRS is going to be swamped by data coming in from all points of the compass reflecting thousands of individuals.

•The 30% withholding as it relates to so called ‘recalcitrant’ account holders withdrawals (not the 30% against non-compliant FFI’s). How can this work? E.g.: I give a cheque for 100 GBP to my friend Fred Bloggs. Fred trots off to his local Barclays branch and is informed by the teller he’s only being given 70 GBP as the rest is withheld and passed to the USA??.....or….I go to a Cashpoint, key in a request for 100 GBP and the machine spits out 70 GBP??

•What if I’m identified as a someone who has never bothered with FATCA reporting? I’m a UK Citizen. I can go back to the UK at any time and live there. A foreign government then has the power to stop me withdrawing monies from my UK accounts? I don’t think so.

•What if I inform my bank of a change of address and have the statements and all correspondence sent to my sister’s house?
•Has anyone had any letters from their UK banks asking them for SSN’s or any other ‘indicia’ information?

What I find most disturbing is the draconian penalties that can be levied for those on the wrong side of annual tax filing. E.g.: the FBAR……thousands must have never heard of it…..but fail to file? And you can be wiped out financially by penalties; just for failing to file…..you actually owe nothing in the case of FBAR. There is something very wrong in a country that writes its laws to inflict penalties on persons that are way out of proportion to the ‘crime’ or their error. I think there is more to this FATCA / FBAR exercise than finding real tax dodgers. This is more about identifying persons that can be ‘robbed’ by the government if there’s enough to go after.
E.g.: Jenny Jones owes $50 in unpaid interest for a foreign account bearing such a small interest rate that she never bothered to report the interest nor declare control over a foreign account to the IRS. The law is written in such a way that the real prize is a hefty fine based upon the value of the foreign account.

Pulaski

To answer just one point, it is not a foreign government that could stop you withdrawing your money, it is the bank, your bank, in your example, a British bank. Why would they do this? Well Uncle Sam may come and ask for the tax, and the bank is going to have to pay no matter what, if they haven't withheld enough it's going to come straight out of the bank's P&L.

So, you say, the bank is British, why doesn't it just tell Uncle Sam to take a hike? Well, most British banks have at least an office in New York to handle business for their major corporate clients, and Uncle Sam will shut that down in a heart beat, so they would wave goodbye to their major corporate clients. Clearly that is not an option. That threat to a non-US bank's US offices and operations allows Uncle Sam to coerce, threaten and intimidate them even when there is no right - back in the 90's a Canadian bank with a branch in Bermuda was fined a $1million per day until they coughed up some records and information that Uncle Sam had no jurisdictional right to, but Uncle Sam was threatening to close down its substantial US presence, so it made a pragmatic commercial decision and caved, handing over the records Uncle Sam was demanding.

JAJ

Except that you've perhaps been reading too many scare stories on forums. If you've paid your taxes, FBAR penalties will generally not be levied - at all, at least there is not one single reported case of that happening. (except for those who unnecessarily went into the voluntary disclosure program, often the result of scaremongering too).

As to the rest, if you go back to the United Kingdom, you still need to file and pay U.S. federal tax due, net of any foreign tax credits. If you want to remain a U.S. citizen, that is.

theOAP

I no longer know where to start on the subject of FATCA. It's spinning wildly out of control. The US Treasury stands fast in the roll-out, and claims all is going forward. The evidence contradicts that statement. It is going forward, but no where near the schedule proposed, and is meeting stiff opposition in some quarters. It's also become multi-faceted as to the variety and number of issues arising from its implementation.

It's best to start with what is confirmed. There are 10 agreements with foreign countries/domains at this time. The key signatories are Germany, Japan, Switzerland, France, and the UK. Already, there are problems with some of those 5. France was to sign the IGA (Intergovernmental Agreement) several weeks ago during the latest G20 round. (Supposedly) due to the US Govt. shutdown at the time, this was cancelled. With the latest NSA revelations involving France, nothing more has been released as to a future signing date. If/when France does sign, it may be announced in the US, but probably little will be said in France. The Swiss Council passed their IGA into force, but there is now a national referendum being raised to overturn the agreement.

As for the UK, FATCA has been sanctioned by an Act of Parliament (Clause 219 of 2013 Finance Bill). It's estimated that implementation in the UK alone will cost UK FFI's £1.6 billion initially, and the cost to maintain it once up and running will be £90 million annually. UK FFI's must now take FATCA very seriously, both in the diligence of accounts, and the reporting of those accounts. A discovery of unreported accounts could result in the FFI being deemed non-compliant and subject to the 30% withholding.

The most important fact: any person with a UK/US Person tie must decide how they wish to respond to personal FATCA/FBAR reporting. For US Persons, any account, whether they reside in the US or the UK and whether the account is in the US or UK, will have to arrange their affairs with FATCA/FBAR reporting in mind.

The OP raises the point of possible ways FATCA/FBAR reporting could be circumvented. For the 'average' person with average assets (whatever that may mean), it's a risk. UK/US Persons having accounts in the UK while they live in the US could use a 'sister's address', but they must be aware of the consequences of being discovered. Those actions could be determined as being wilfully hiding accounts. The penalties for that action can be severe. As for those with greater-than-average accounts, there are no doubt highly paid professional accountants discovering multiple ways of avoiding the issue. The problem with FATCA, aside from only benefiting the US, is unless a sufficient number of foreign tax jurisdictions sign on there is a great possibility of new tax havens, developed with the avoidance of FATCA in mind, springing up around the world.

Information overload, penalties for minnows and krill (small accounts), the possibility for identity theft, the sharing of information with many other US Agencies in the name of fighting terrorism (See Senator Carl Levin's statement), the legality of reciprocity by US FI's in the US's own tax havens, the sovereignty of other nations, all are questions (and there are many more) that at this time are unanswered.

robin1234

That'll be interesting. A referendum addresses the issue head on that up till now, national populations (US, UK, Swiss etc.) didn't know much or care much about the issue.
That doesn't sound like much money, spread out over many FFIs .....
How do you mean? If the account is in the US, it's off the FATCA/FBAR radar, isn't it? You only have to report to IRS on the 1040 on those ... ?

theOAP

It's been estimated that the return on FATCA will be $8 billion over a 10 year period. There has been no actual cost/benefit analysis done. If the average cost of initial implementation for the 5 countries listed were the UK amount of $2.5 billion (£1.6 billion), those 5 countries (total $12.5 billion) could simply pay the US $8 billion over the next 10 years, have $4.5 billion left over, not have to pay $145 million (£90 million) per year for the next 10 years (for the five: saving $7.25 billion), the US would have its $8 billion (at a cost of $0), and everyone could forget about the whole thing! If it's the amount for the 10 countries that have signed....... or if it's for the 50 countries the Treasury claims to be talking to..........you're right; what's a few $billion here or there? After all, it will keep those in the compliance industry (FATCA advisors and tax preparers) in loads of money for years. Gotta look after growing the economy.


OK, the long explanation:
If you are a UK/US Person, living in the US, and have no foreign (including UK) accounts, the consideration is short: nothing to report.
If you are a UK person who may have lived in the US on a green card (but never became a US person after leaving), living in the UK, and you have no foreign (including US) accounts, the consideration is short: nothing to report.

If you are a UK/US person, living in the US, with foreign accounts (including the UK), and are a US Person for tax purposes, you should consider reporting.
If you are a UK person, but not a US Person, living in the UK, and you have an account in the US (past green card), you should consider filing a UK self-assessment tax form (due to reciprocity, if allowed).
If you are a US Person or UK/US Person, living in the UK, and you have a foreign account (including the US), you should consider reporting in both the UK (arising basis) and US.

JAJ

I doubt there will be any material impact from FATCA in jurisdictions such as the United Kingdom, which were sharing tax information with the United States anyway.

The legislation will impact primarily on banks and countries/territories which were not sharing such information before now.

It does add some self reporting requirements on U.S. citizens and residents with assets above certain thresholds but doesn't make a difference to tax payable by any U.S. resident or citizen.

robin1234

In that regard, it is important to note (for the benefit of people who are just now being made aware of FATCA and FBAR as a result of the scare stories in the press) that there are no new reporting requirements for individual taxpayers who are US citizens or residents. FBAR reporting has been in place for decades, and FATCA reporting (in practice, the Form 8938) was required for the 2011 tax tax year and subsequent years. The fact that banks etc. will have new reporting requirements doesn't affect the taxpayer (unless the taxpayer has failed to report up till now, of course.)

nun

It's interesting that while looking at US domiciled ETFs that you can buy through the UK broker Hargreaves and Lansdown I noticed that they prominently state that you must file a W-8BEN if you buy them. I emailed to ask them what a US citizen should do and they said just file a W-9 with them.....so looks like they are all set to deal with US citizens.

Of course the way to avoid all this FATCA/FBAR stuff as an individual is to stay below the thresholds and keep as much as you can in the US. That has the added benefit of avoiding the outrageous expense of UK based funds and pensions.

theOAP

I've been reading the 3 previous posts (several times). They're good posts, and there's nothing wrong with them. The post from nun relates to what can be done by those already aware of FATCA on a personal level. The post from robin reiterates reporting as it exists, again on a personal level. JAJ's post has given pause for thought.

If we ignore the financial centres in the US (New York and Boston), 4 of our 5 countries mentioned as already agreeing an IGA (Germany, Switzerland, Japan, and the UK) contain 5 out of 7 of the worlds largest financial centres. (The other 2 are Hong Kong and Singapore.) If it's the Xinhua-Dow, it's 5 out of the top 8. It makes sense as to why they've signed agreements, and it stands to reason that the US would want FATCA to operate smoothly in those countries.

Bearing that last statement in mind, some points for debate:
1. Are we having a conversation concerning what the banks/building societies/etc. are going to do too soon? Reporting doesn't start until July 2014 and then it's only an electronic search of the banks' (et al) existing data base. Obviously, any new customers after that date are going to be quizzed on US indicia, if not before. When will the 3rd party subcontractors begin their searches of publicly available information (more detailed bank data bases, govt. data bases, social media, etc.) on existing customers? What will the banks (et al) ask of the existing customers; nothing, sign a W9, or sign away national privacy rights (as in Switzerland) due to the sharing with multiple US agencies and the 3rd party subcontractors? Will there be legal challenges from groups within those countries as is happening in Switzerland now (the challenges can't start until banks actually start a form of 'offending' someone)? With that number of 'players' involved, will the integrity of an individuals financial information require assurances on security (the IRS has an abysmal record in this area)? If there is no reciprocity on the US part, will the countries seek a renegotiation (The UK govt. sold FATCA to the House as reciprocity being the icing on the cake)? Again, and not to be difficult, are we providing only our best guesses at this time, presuming what will happen? The best time for absolute statements concerning the implementation of FATCA will be 18 to 36 months from now.

2. Won't the banks (et al) have to do a witch hunt of its customers? Not scare mongering, just a question of reason. They can not afford to have too many customers escape detection (or, could the US decide it's OK?) or they risk losing their compliant status. Taken to the extreme, their customers may become their worst enemies. For example, some silly US Person I know lists every bank/building society account on an 8938. Many of the original accounts were taken out decades ago. Was there any question about nationality, or only residency? For one account, residency was in a hotel. That silly person doesn't remember. If an 8938 is filed listing an account, and the bank/building society doesn't report it for FATCA because US indicia didn't turn up on their data base search, who has a problem? Will HMRC be the backstop since it will have records from all accounts from all FFIs? In reality, how deep will the search for US indicia on current customers be and what will be the reaction to what has to be some missed accounts (the IGA holds the banks responsible for the oversights of its 3rd party subcontractors)?

3. There are several individuals the above silly person is aware of that have identified themselves as being born in the US to UK parents, and left the US in their early childhood. They don't consider themselves as US citizens. They are professionals, doing quite nicely, and are in successful partnerships. They seem like the kind of people that would make wise investments and provide adequately for their future. What happens when they're told they are a US Person,...with obligations? Will they simply say oops, or could there be a backlash? They're reasonably influential individuals and could conceivably raise a bit of a stink. One could guess with their 'partnerships' and investments they will not meet the simple requirements for the current "Streamlined" programme. There has been little said of FATCA in the UK, and the US certainly has said nothing by way of information to the general public. Will the IRS be offering a new form of disclosure once FATCA is up and running?

nun

For most US expats 8938 and FBAR are easily avoided and if they do have to file it's should only be a minor reporting inconvenience as US citizens will have beed faithfully filing their taxes all along

The main problem area I see is if FFI simply don't want the bother of dealing with US citizens and kick them to the curb. That will cause major problems especially if the trend continues for US banks etc to refuse to deal with customers who have foreign addresses......talk about Catch 22

The issue with "accidental americans' isn't changed by FATCA, the bizarre citizenship rules and even more bizarre citizenship based taxation of the US will need to change to get rid of that old chestnut.

JAJ

Many British banks have already amended their terms and conditions to allow them to comply with FATCA. There is no sign - as yet - that banks are refusing to deal with U.S. citizens locally resident. Except in Switzerland where there are special circumstances.

nun

That's certainly true for Hargreaves and Lansdown.....it's unfortunate that many US banks and brokerages won't deal with US citizens with foreign addresses, but that's got nothing to do with FATCA.

Danoz

FATCA like of lot of regulation in the last ten years has a number of influencing factors, some obvious others not so. Part of the reason as it has already been said, is to go after incomes generated in foreign secrecy jurisdications. As previously stated once you are a US citizen, you need to pay taxes to the US on your global income. THis includes incomes generated in foreign jurisdications. Part of the aim to identify US citizens that hold revenue generation in offshroe jurisdications, and have the banks report to the IRS (either directly of via that juridisctions nomimated reporting route). THis then creates a record of expetation within the US on how much taxes should be paid and whether what is paid is then in line with the expected earnings profile of the US Citizen. Once FATCA is in place and the initial burden of implementating has been realised, dont be suprised to see other contries like the UK go down a similar route. Tax laws are changing across the world around intent and what is considered domiciled for tax purposes.

Another facet behind this, is removing the cost away from the government bodies and onto that of the industry and the FIs. This is not new, it has been happening for some time, take AML and the monitoring and reporting of trade finance, dual use goods, custom forms for releasing of LCs etc... it takes a lot of the cost away from Customs and onto the banks to take on part of the Customs burden.

With regards to what is FACTA going to acheive, it is aimed at the average middle to high class earner. Its not aimed at big business. Lets face it, big business influences policies and regulations through lobbying and dontations. Due to this tax loopholes will continue to exist. As a result, given that governments are trying to find additional means of income, the next best source is the average population. Lots of small amounts turn into a big revenue stream. They know that this will work, as the average person is a law abiding citizen and does not want to be on the wrong side, so they will abide. Again, the governments whilst they will have some set up costs, the majority is absorbed by the industry. As the industry will play ball as there is always the threat that they will be denied a US banking license, or more likely start seeing some of the more astronical fines that are coming out (e.g. 1 billion + for HSBC, JPMG etc..). Its not worth the risk, especially cosndiering profilts tend to be higher anyway. Cost of business...

There was mention that the clients could be the IRS's own nightmare due to the information inflow. I dont think they are worried about this. Have a look at how much information already flows in from FIs into the reporting bodies, suspicion reporting (defenisive filing etc..), Currency reporting thresholds (e.g. anything more than 10k, 1k 15k depending where you are). Its all about information. The more you have, the move capability you have, even if you do not use it all.

Other things that FACTA will support, the US Sanctions regime. Many people hide the US connection behind beneficial ownership schemes that removes them from the front line, allowing US corporations and citizens to bypass sanctions and other requirements. This is another method of fleshing out US connections. Look at the UK also, passing into law beneifical ownership requirements and public databases. There is a lot of interconnections.

Annyway enough from me.

nun

I have a basic problem with the philosophy behind FACTA as there's an implicit assumption that the US tax payer isn't already complying with the law and it's just another example of the over intrusion of the state into the life of the citizen. It's a blunt instrument - like so much of US foreign policy.

I find it hard to believe that anything like FATCA will be implemented by other countries as the US will refuse to share information about foreign depositors and the US financial industry just won't let any such legislation go through Congress. A combination of political influence, money, hubris and hypocrisy will stop it.