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FATCA - important guidance for trustees

Last updated: 2 May 2014

This guidance is relevant for all UK trusts and trustees, whether or not they have any known US connections.

The Foreign Account Tax Compliance Act (FATCA) is US legislation aimed at reducing tax evasion by their citizens. It requires financial institutions outside the US to pass information about their US customers to the US tax authorities, the Internal Revenue Service (IRS).

A 30 per cent withholding tax is imposed on the US source of income of any financial institution that fails to comply.

On 12 September 2012, the UK and US signed a treaty to implement FATCA in the UK (The UK-US Agreement to Improve International Tax Compliance and to Implement FATCA).

UK financial institutions must meet the requirements of the Treaty and UK legislation in order to avoid the withholding tax.

All UK trusts and trustees, whether or not they have any known US connections, need to consider their status under the UK/US agreement.

If they are required to register with the IRS under the agreement, they must do so by 25 October 2014.

The guidance and accompanying flow chart below are intended to help trustees and their advisers determine whether registration is required.

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