What is FATCA?

FATCA (The Foreign Account Tax Compliance Act) was introduced in the United States in 2010 to ensure their citizens were fully disclosing their worldwide income to the US Internal Revenue Service (IRS).

As a result of the UK–US Intergovernmental Agreement (IGA) this US piece of legislation is now part of UK Law through s.222 of The Finance Act 2013 and the regulations issued under that section.

It is important to understand that all UK Trusts are caught by FATCA irrespective of whether or not they have US persons as settlors, trustees or beneficiaries or hold US assets.


Who is affected?

  • Any person who acts as a trustee
  • Any Foreign Financial institution (FI)

There is a wide definition of FIs. In practice under HMRC guidance family trusts are regarded as FIs where the trust funds are managed by a discretionary fund manager and more than 50% of the trust income is derived from the investments under management.

If a trust is not an FI then it will be a Non Financial (Foreign) Entity (NFFE). If a trust is an NFFE, it does not need to register or report to the IRS. However, if the trustees have an account with an FI they will need to confirm their status as an NFFE to that institution.

An example of a trust which would be an NFFE is a trust where the only asset or main income producing asset is a property which is occupied by a beneficiary or let.

The trustees will still have to carry out due diligence in connection with the NFFE to see if there are specified US persons (see below) connected to the NFFE.


What happens next?

The trustees of any trust will need to review their trust to ascertain whether or not the trust is caught by FATCA. In particular, the trustees will need to check the status of the beneficiaries under the trusts which they manage to ascertain whether or not any beneficiary within the Trust is a US specified person (see below).

If the trust is caught by the FATCA provisions then the trust needs to be registered with the IRS.

In the case of those trusts which are caught by the new provisions, there are two possible alternatives:

  • The trustees can register and report the trust themselves to the IRS or the trustees can use a third party service provider. However the compliance responsibilities remain with the trust and the use of a third party service provider is likely to incur higher charges than if the trustees deal with the registration and reporting themselves.
  • The trustees can appoint a designated withholding agent. In this situation, a trust need not register with the IRS, since the Designated Withholding Agent, which must be a reporting financial institution, will undertake due diligence and reporting on behalf of the trust.
    In other words, in this scenario, it will be the stockbrokers who assist with the management of the trust investments who undertake the registration and reporting.

However, it is our understanding that it is only possible to use this option where all trust payments are made to and from the accounts operated by the Designated Withholding Agent (stockbroker).


What are the registration requirements?

The trust must register with IRS by completion of an online form and the trust will then obtain a Global Intermediary Identification Number (GIIN). This number is then used as a reference for all reporting and will need to be disclosed on FATCA status supporting documentation.

The expectation is that in future banks and all other financial institutions will expect trusts caught by the provisions to provide its GIIN.


What needs to be reported?

Any US specified persons who are connected to the trust. This means in practice beneficiaries who are entitled to 25% or more of the income of the trust.

In the case of those trusts where there is no US specified person there will still be a need to submit a nil return to HMRC on an annual basis.


IRS portal

The IRS portal is open for FIs to register.


These notes are not exhaustive and are meant as a basis for discussion with your legal adviser. If clients wish to discuss any of the above, please contact our Private Client Team 020 8940 4051 who will be pleased to help you

IMPORTANT: this information is intended to be a general statement of the law. No action should be taken in reliance on it without seeking specific legal advice.

Our Private Client team

Dixon Ward | Wills, Powers of Attorney, Probate & Trusts  | Notarial Services | The Team | Gregory White | Our Story

Gregory White

Private Client department
[email protected]

Dixon Ward | Wills, Powers of Attorney, Probate & Trusts | The Team | Abigail Pfister

Abigail Pfister

Private Client department
[email protected]

Dixon Ward | Wills, Powers of Attorney, Probate & Trusts | The Team | Paul Denza

Paul Denza

Private Client department
[email protected]

Dixon Ward | Wills, Powers of Attorney, Probate & Trusts | The Team | Reena Khatri

Reena Khatri

Private Client department
[email protected]

Stephanie Mends

Private Client department
[email protected]

Dixon Ward | Wills, Powers of Attorney, Probate & Trusts | The Team | Sabrina Caldeira

Sabrina Caldeira

Private Client department
[email protected]

Dixon Ward | Wills, Powers of Attorney, Probate & Trusts | The Team | Shaun'Tay Saunders

Shaun’Tay Saunders

Private Client department
[email protected]

Sofia Williams

Private Client department
[email protected]

Related Insights

Why Make a Will?

1. Avoid Intestacy rules 2. Tax planning 3. Choose your Executors and Trustees 4. Funeral instructions 5. Peace of mind   1. Avoid Intestacy rules There are many reasons why it is sensible...

How to make a Will

1. Instructing a solicitor 2. Information we require 3. Signing 4. Updating 5. Storage   1. Instructing a solicitor A Will is an important document which must comply with certain legal...

Inheritance Tax

A. EXEMPT TRANSFERS Provided these gifts satisfy the following conditions they are completely exempt from Inheritance Tax.   1. Small Gifts A Donor may make any number of gifts of up to a...

Normal Expenditure out of Income Exemption

What is the Normal Expenditure out of Income Exemption? In our experience many clients are unaware of the normal expenditure out of income exemption which is a very useful exemption allowing an...

10 Tips for Digital Estate Planning

Giving thought in your lifetime to your digital assets and digitally stored information can help your Executors with the administration of your estate. Here are 10 tips to consider for digital...

Digital Afterlife

Digital afterlife Most people, when making their Wills, do not give digital assets any thought. However, the majority of people in the UK own some sort of digital asset, be it an online bank...

Lifetime Discretionary Trusts

Please note that these notes are in no way intended to be exhaustive. Their purpose is to give clients some insight into the nature of a discretionary trust and the work involved in the creation...

Lasting Powers of Attorney – Health and Welfare

What is a HW LPA? A Lasting Power of Attorney for Health and Welfare (HW LPA) is a legal document by which you (the Donor) can appoint one or more persons (the Attorney) to make personal welfare...

A guide for personal representatives (executors)

At the outset The role of the personal representative arises when someone who has died has named you in their Will as an executor. Personal representatives are also those individuals entrusted...

A guide for beneficiaries

What is the residue? The residue is what remains in an estate after paying any tax due, the deceased’s debts together with any cash legacies in the Will including specific gifts. In most Wills...

Get in touch

Simply fill in the form on the right and we’ll put you in touch with the right person. However, if you would rather email, you can do so at: [email protected]

If you would prefer to speak to someone on the phone, you can reach our team on: 020 8940 4051

You can also visit us at our offices on beautiful Richmond Green:
Dixon Ward, 16 The Green, Richmond, Surrey, TW9 1QD

Our reception is open 09:00 - 17:30, Monday to Friday (excluding Bank Holidays).

Gregory White & Abigail Pfister are the
accredited Lifetime Lawyers at Dixon Ward

10 + 4 =

Dixon Ward | Contact | Map