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In this era of twitter and text messages it is common for acronyms to be used to save space.  Anyone with a teenager would probably struggle to understand some of their texts or tweets with the plethora of OMG's, BTW's and others that I could not repeat in company.  However, if you are a US taxpayer you will be fully aware of what FATCA stands for and you certainly would not use LOL in the same sentence.

The Foreign Account Tax Compliance Act (don't you wish they had added Treaty at the end so at least we could have had a chuckle) has been around for a few years.  The US has always compelled any US citizen to declare all their total worldwide assets and earnings.  However as they do not trust their citizens to do so, they are now "encouraging" other countries to sign up to the Act and have their financial institutions report any assets held by US citizens and taxpayers.

As you would expect the UK and most other European countries came on board in 2012, but as it only came into force last summer the ramifications of this are only really now becoming apparent.  For example, every UK bank, investment manager and insurance company has to make a submission to the IRS each year declaring what assets, if any, they hold that belong to someone with a connection to the US.  Doing so is onerous and not cheap and of course we will all have to pay for this via higher charges even though it does not affect the vast bulk of UK taxpayers.

The intention of the Act was to try and catch deliberate tax avoiders, but in reality its impact has affected law-abiding citizens far more.  The number of US born citizens living abroad that have renounced their citizenship has increased sevenfold since before the Act came into force.  In the bulk of cases I am sure this is not because they have anything to hide but because they may have no intention of ever returning to the US and they cannot be bothered to have to report their assets to the US government each year.

There is no doubt that the US is keen to be seen as the world's policeman, and no doubt the members of FIFA said WTH (or an acronym to that effect) when they were busted by the FBI a few weeks ago.  But for every Sepp Blatter and Jack Warner that they unearth there is untold cost for the rest of us.

As your adviser, ASAM does not have to report to the US authorities each year as we are not the institution holding the assets.  However, as you may know we do offer a free trustee service to clients.  In cases where ASAM acts as trustees if any of the beneficiaries or trustees has a connection to the US we would have a duty to undertake an annual return. 

As a result, we will be writing to all clients where we act as trustees asking them to confirm whether any of the beneficiaries has a US connection.  Unfortunately in any instances where they do we will have to be replaced as trustees.  We do not expect this to impact more than a handful of trusts but if it does affect you I hope you will understand our reasons.  The Republicans have suggested they will repeal the act if they get into power and if they do it will be a relief for many to say to the IRS it is NOYB!

Steve
Author
Steve Forbes
Managing Director
Alan Steel Asset Management Ltd is authorised and regulated by the Financial Conduct Authority

The Financial Conduct Authority does not regulate tax advice

This letter is the personal view of Steve Forbes. Please check the appropriateness to your individual position with your adviser before taking or refraining from any action.