The Investment Management Association (IMA) has called on HM Revenue & Customs (HMRC) to consult further on which financial firms will be responsible for reporting on US clients under the incoming Foreign Account Tax Compliance Act (Fatca).
Fatca was drafted in March 2010 to clamp down on tax avoidance by US persons who invested through what it calls a Foreign Financial Institution (FFI).
In September the Tax Incentivised Savings Association (Tisa) warned that financial advisers could be subject to the onerous reporting requirements of Fatca following a bilateral agreement between the UK and the US reached that month.
Jeffrey Mushens, Tisa technical director, warned that the agreement resulted in UK pension and ISA providers being granted exemption from Fatca, but advisers could be caught by the act’s reporting regime.
The IMA response paper argued that there was still uncertainty about which companies and firms would qualify as a UK Financial Institution (UKFI). It added it was concerned about the potential impact and scope of UKFIs.
‘It would be helpful if UK regulations and guidance could limit responsibility for the actions of third party service providers to those directly contracted by the UKFI,’ it said.
The response paper stated that until more information was available, UKFIs would be unable to make meaningful progress as to how they could implement their Fatca due diligence.
It said: ‘The IMA shares the concerns expressed by other industry bodies on the continued uncertainty surrounding the registration process for UKFIs. There is now an urgent need to clarify how the registration process will work in practice, and how the UK regulations will mandate all UKFIs to register with the US.’