Explanatory Note
(This note is not part of the Regulations)
These Regulations are made to give effect to the agreements and arrangements reached between the Government of the United Kingdom and other jurisdictions to improve international tax compliance. The agreements and arrangements are-
- Council Directive 2011/16/EU (“the DAC”);
- the Multilateral Competent Authority Agreement on the Automatic Exchange of Financial Account Information signed by the Government of the United Kingdom of Great Britain and Northern Ireland on 29th October 2014, this implements the Common Reporting Standard developed by the Organisation for Economic Co-Operation and Development which has been agreed by the jurisdictions listed in Schedule 1 (“the CRS”);
- the agreement reached between the Government of the United Kingdom of Great Britain and Northern Ireland and the Government of the United States of America to improve international tax compliance and to implement FATCA, signed on 12th September 2012 (“the FATCA agreement”).
Regulation 1 provides for citation, commencement, effect and interpretation. It identifies and defines the above agreements and arrangements and provides that a reference to one of the agreements or arrangements (“relevant agreement”) is a reference to how the agreement takes effect from time to time.
Regulation 2 defines “reportable account” and makes provision for a reporting financial institution to elect for a calendar year to treat certain accounts as if they were not reportable accounts.
Regulation 3 requires reporting financial institutions to establish and maintain arrangements to identify reportable accounts and the tax residence of holders of accounts and to apply the appropriate due diligence requirements.
Regulations 4 and 5 modify the due diligence requirements in specified cases.
Regulation 6 requires reporting financial institutions to make an electronic return in respect of every calendar year from a year specified in that regulation.
Regulation 7 sets out provisions in relation to the electronic return and makes provision as to the form and manner of the return to be specified in specific or general directions given by the Commissioners for Her Majesty's Revenue and Customs.
Regulations 8 and 9 modify the reporting and due diligence requirements in relation to certain cases in respect of the FATCA agreement.
Regulation 10 imposes a notification obligation.
Regulation 11 is concerned with the position of reporting financial institutions that are not resident in the United Kingdom, in such a case the obligations of an institution are to be treated as if they were also the obligations of its UK representative.
Regulation 12 permits the use of service providers to undertake the identification and reporting obligations in regulations 6 and 7.
Regulations 13 to 22 make provision for penalties for breach of obligations under these Regulations.
Regulation 23 is an anti-avoidance provision.
Regulation 24 contains definitions.
Regulation 25 revokes the International Tax Compliance (United States of America) Regulations 2014 (S.I. 2014/1506) as these Regulations replace those Regulations.
Schedule 1 sets out the participation jurisdictions in relation to the CRS.
Schedule 2 sets out excluded accounts for the purposes of the DAC and the CRS.
A transposition note which sets out how the main elements of the DAC are transposed into UK law is annexed to the Explanatory Memorandum covering this instrument.
A Tax Information and Impact Note covering this instrument was published on 18th March 2015 and is available on the HMRC website at http://www.hmrc.gov.uk/thelibrary/tiins.htm. It remains an accurate summary of the impacts that apply to this instrument.