The International Tax Compliance Regulations 2015 (the Regulations) provide a consolidated legal basis for the due diligence and reporting obligations for UK financial institutions in relation to the Common Reporting Standard (CRS), the UK/US Intergovernmental Agreement on FATCA (UK/US IGA) and the EU Directive on Administrative Co-operation (DAC). The regulations came into force from 15 April 2015 in relation to the UK/US IGA and from 01 January 2016 in relation to the DAC and the CRS.
In broad terms, the regulations introduce obligations on financial institutions to identify accounts maintained for account holders who are tax resident in the EU or jurisdictions with which the UK has entered into an agreement to automatically exchange tax information, and collect and report such information in a specified manner to HMRC.
With effect from 17 May 2017, these Regulations were amended by the International Tax Compliance (Amendment) Regulations 2017. The amendments introduce a number of changes to the Regulations.
Firstly, the amendments widen the scope of the Regulations by deleting the list of specified participating jurisdictions and replacing that provision with a generic provision that applies the Regulations to any arrangements entered into by the UK or the EU for the purposes of implementing CRS by 17 May 2017.
Secondly, the amendments rewrite and clarify the due diligence requirements of financial institutions in relation to financial accounts, including identifying the tax residence of account holders, and provide for the period for which records are to be kept. In addition, the amendments provide that a financial institution must report on a pre-existing account, whether or not that account is maintained in the particular year.
Finally, the amendments provide HMRC with further information gathering powers in relation to compliance with the Regulations and clarify the operation of the penalty regime for non-compliance in relation to partnerships and trusts.
The deadline for financial institutions to submit returns for the year ended 31 December 2016 is 31 May 2017, the first year for CRS filing. Returns submitted after the deadline may result in penalties being charged. Although a number of other jurisdictions, such as the Cayman Islands, have extended reporting deadlines, there is currently no indication that HMRC will take a similar course.
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