UK FATCA: ARR deadline approaching for UK resident non-domiciled individuals

In November 2013 the governments of the Cayman Islands and the British Virgin Islands (“BVI”) entered into intergovernmental agreements with the United Kingdom (“UK IGAs”) which contained provisions for the establishment of a framework for the reporting of financial account information. That framework is similar in scope to the framework established to implement US FATCA. Additionally, the UK IGAs make provision in Annex III for the use of an alternative reporting regime (“ARR”) in place of the full reporting requirements set out in the UK IGAs in certain circumstances.

The ARR may only be utilised by UK Resident Non-Domiciled individuals (“RND”) that have claimed to be taxed under the remittance basis set out in Part 14 Chapter A1 of the United Kingdom Income Tax Act 2007. In order to avail of the provisions of the ARR, an RND must elect to use this regime and this election needs to be made to Reporting Cayman Financial Institution(s) and/or Reporting BVI Financial Institution(s) which hold UK Reportable Accounts on behalf of the RND. The deadline for an RND to make this election in respect of information to be reported for the UK tax year ending 5 April 2015 was 30 April 2015 in Cayman1 and 31 May 2015 in the BVI.

A Reporting Cayman or BVI Financial Institution is also required to elect to use the ARR and if both the Reporting Cayman or BVI Financial Institution and the RND do not make the requisite elections, the full reporting regime under the UK IGAs will apply. The deadline of a Reporting Cayman Financial Institution to make this election for the UK tax year ending 5 April 2015 was 30 April 20152 while Reporting BVI Financial Institutions must make this election by 31 May 2015.

While the RND makes his/her election to Reporting Cayman and/or BVI Financial Institution(s), Reporting Cayman Financial Institutions should have submitted their elections to the Cayman Tax Information Authority (“TIA”) prior to 30 April 2015 if the ARR is to be offered for the UK tax year ending 5 April 2015 whilst Reporting BVI Financial Institutions should submit their elections to the BVI International Tax Authority (“ITA”) for the UK tax year ending 5 April 2015 prior to 31 May 2015. Any such election will remain valid until revoked by the Reporting Cayman or BVI Financial Institution. Reporting Cayman and/or BVI Financial Institutions are also required to provide to the TIA and ITA by 31 May 2015 the name, address and, where available, date of birth and national insurance number of any investors who make an ARR election for the tax year ending 5 April 2015.

There is one final action to be taken by an RND if he/she wishes the ARR to apply to his/her UK Reportable Accounts and that is to provide a self-certification to the relevant Reporting Cayman or BVI Financial Institution that:

a. the RND’s UK tax return for the relevant tax year contains a claim or statement that the RND is not domiciled anywhere in the UK, and includes a claim to be taxed under the remittance basis under Part 14 Chapter A1 of the United Kingdom Income Tax Act 2007 and if appropriate the tax chargeable under section 809H of the United Kingdom Income Tax Act 2007 has been paid, or any such equivalent sections in any successor legislation; and

b. to the best of his/her knowledge, the domicile status and claim to be taxed on a remittance basis is not being formally disputed by Her Majesty’s Revenue and Customs.

While the Reporting Cayman or BVI Financial Institution can determine the format of the self-certification to be provided to it by RNDs, it is necessary for the self-certification to be in writing and signed by the RND. A Reporting Cayman or BVI Financial Institution has an obligation to retain any self-certifications received from RNDs for a period of six years following the end of the relevant tax year. The deadline for submission of a self-certification in respect of the tax year ending 5 April 2015 is 28 February 2016 in both jurisdictions.

While elections are required to be made by both RNDs and Reporting Cayman and/or BVI Financial Institutions in 2015, reports to be submitted under the ARR for the UK tax year ending 5 April 2015 are not due to the TIA or the ITA until 31 May 2016. The information to be reported under the ARR is:

a. Name, address, date of birth and national insurance number. Although in the case of date of birth and national insurance number, this information only needs to be reported where it is available to the Reporting Cayman or BVI Financial Institution, noting that this information should have been obtained for new accounts opened after 1 July 2014 and for accounts opened prior to this date, processes should be put in place to ensure that this information has been collated by 1 January 2017;
b. Gross payments and movements of assets from an originating UK source into the UK Reportable Account;
c. Gross payments and movements of assets from an originating source territory or jurisdiction that cannot be determined;
d. Gross payments from the UK Reportable Account to an ultimate UK destination; and
e. Gross payments from the UK Reportable Account to an ultimate territory or jurisdiction that cannot be determined.

Where gross payments and movements of assets have been made during the relevant tax year, the Reporting Cayman or BVI Financial Institution must also report:

a.the account number; and

b. the name of the Reporting Cayman or BVI Financial Institution and its Global Intermediary Identification Number (“GIIN”) or in the BVI, if it does not have a GIIN, its BVI tax identification number.