With reporting now underway in the UK for both FATCA (the US Foreign Account Tax Compliance Act) and the Common Reporting Standard (CRS), STEP has been liaising with HMRC on some of the more common reporting issues:
1. The financial institution (FI) has to re-register and is not able to view previous returns on the portal, because login details are unknown following staff changes.
Automatic Exchange of Information (AEOI) portal login details should be held securely and known only by those who need them. The FI should ensure that there is an appropriate procedure to maintain access to their portal. A pseudo email account might be an appropriate solution, providing the FI has robust security and data protection safeguards in place.
2. The FI misunderstands what constitutes an undocumented account.
HMRC has advised that FIs are wrongly reporting accounts as ‘undocumented’ when a self-certification requested from an account holder has not been completed. This has led to numerous accounts being erroneously reported with a GB resident country code. The definition of an undocumented account can be found at IEIM403100.
3. The FI makes a submission using the XML schema which is rejected due to inappropriate re-use of MessageRef, FIReturnRef and AccountRef.
The schema guidance gives comprehensive advice on use of references and can be found here.
4. The FI reports accounts where the account holder is not resident in a reportable jurisdiction.
Individuals who are not resident in a reportable jurisdiction (see IEIM402340) should not be reported. Some jurisdictions which have signed up to CRS are non-reciprocal, and some which have signed up are not yet ready to receive exchanges.
5. The FI reports accounts as being NPFFIs but resident country code is not US.
The term non-participating foreign financial institution (NPFFI) is for FATCA only, in respect of years up to 2016, and not applicable for CRS purposes. If used, the resident country code should be US.
6. The FI reports accounts that are excluded accounts and therefore non-reportable, such as registered pension schemes.
A full list of excluded accounts can be found at IEIM 401720.
7. The FI reports persons who are not reportable.
Under CRS, corporations with regularly traded stock and related entities are not reportable account holders, nor are governmental entities, international organisations, central banks or financial institutions. A list of exemptions to the term ‘specified US person’ under FATCA can be found in Article 1 (gg) of the UK-US Inter-Governmental Agreement (IGA).
8. The FI reports joint individual accounts as entity accounts.
A jointly-held individual account is not an entity account and the account information to be exchanged can be found at IEIM402140. However, partnerships, including general partnerships, are treated as entities, irrespective of their legal form (see IEIM400860).
9. The AEOI enquiry helpline is for financial institutions only.
HMRC requests that you don’t share details of the AEOI enquiry helpline with your account holders. This inundates its AEOI filing team and prevents it from being able to assist FIs with their reporting obligations.
10. The FI leaves filing to the last minute.
Filing submissions sufficiently in advance of the 31 May 2018 deadline allows FIs extra time to deal with any unexpected issues such as missing information, or inaccurate XML schema, that might lead to the submission being rejected.
STEP will continue to consult with HMRC on ongoing technical issues.