UK Son of FATCA Regulations in Force

The UK Government has undertaken the online publishing of the final, adopted version of The International Tax Compliance (Crown Dependencies and Gibraltar ) Regulations 2014, which came into force on 31st March 2014, to enforce the expanded tax information exchange agreements signed between UK and Jersey, Guernsey, the Isle of Man, and Gibraltar for purposes of implementing a regime similar to that under   United State’s FATCA ( Foreign Account Tax Compliance Act).

The conclusion of the pacts, commonly referred to as “son of FATCA” agreements was finalized between October and November 2013 for purposes of providing for a reciprocal enhancement to the territories’ information disclosure commitments on assets held in back accounts by their respective resident tax payers. The agreements are inclusive of a commitment to automatic annual information exchange on details that relate to accounts maintained by financial institutions in their territories.

The UK Government while publishing the final regulations emphasized that, “ These agreements are an important part of the UK’s policy of improving fairness in the tax system and tackling offshore evasion , through increasing the deterrent effect- both of which stem from the increased use of automatic tax information exchange. Greater tax transparency and the automatic exchange of information is a key part of the Government’s wider offshore evasion strategy, as outlined in the policy document No Safe Havens published at Budget 2013.”

The agreements are pursuant to earlier agreements between the UK and the US to improve international tax compliance and implement FATCA (signed on 12th September 2012), and also include subsequent developments in the model used as the agreement’s basis. The intention of using this pursuance (insistence) is for minimizing costs associated with tax administration and compliance burden for businesses. However, there are some evident differences from the agreements being with the US that highlight the differing risk profiles attributed to the closer integration of the financial markets of the UK and the territories involved.

The regulations came into effect on 31st March 2014 and will affect Guernsey, Jersey, Isle of Man and Gibraltar financial accounts (as defined in the legislation) maintained on or after 30th June 2014.