STEP LatAm Conference 2017 in Colombia

CartagenaA sell-out audience of over 370 delegates has been attending the 2017 STEP LatAm Conference in Cartagena, Colombia this week. The fact that they managed to get here in spite of a local transport strike made me feel, as a Brit, rather at home, but it also shows what a strong following the annual STEP Latam Conference now has.

Looking at STEP in the Americas, we now have a network of well over 40 branches with, between them, almost 5,500 members. This makes our major conferences a major meeting place for practitioners across both North and South America.

STEP Colombia is one of our newer STEP branches, but has a group of committed volunteers working hard to establish STEP in the jurisdiction as a way of enhancing professional knowledge and building international links in the fast-developing country. Cartagena was an inspired choice of venue for the event; as a major UN World Heritage site with an immaculately preserved historic centre, it proved highly appealing for delegates from further afield.

The twin issues of the European pressures for public registers of beneficial ownership and the implications of the US’ non-participation in the Common Reporting Standard (CRS) were just two of the key themes explored in the conference, which Patricia Wass TEP, Chair of STEP Worldwide and Luz Alfonso TEP, Conference Chair and one of the founder members of STEP Colombia, jointly opened.

After this year’s enormous success, many are already looking forward to next year’s STEP LatAm Conference in Mexico.

George Hodgson is Chief Executive of STEP

Information exchange reporting FAQs

Emily Deane TEPWith reporting now underway in the UK for both FATCA and the Common Reporting Standard (CRS), STEP has been liaising with HMRC on some of the finer points of reporting.

Can I still submit CRS amendments?

There is some time available following the 31 May 2017 deadline for submission of amendments or corrections. If you need to submit an amendment within the first few weeks of filing then HMRC should be able to include the amendments in the first exchange scheduled for 30 September and the information will be sent to the relevant jurisdiction.

What are the penalties for late CRS reporting?

HMRC has confirmed that they will take a soft approach towards penalties in the early stages of CRS (like FATCA, the US Foreign Account Tax Compliance Act ) – particularly if there are CRS system errors that incur late filing. However, a harder approach may be taken towards people who are deliberately negligent with their filing.

FATCA: what do I do if a US TIN is unavailable?

It has previously been identified that in some cases a nine-zero approach will be accepted when a TIN (Taxpayer Identification Number) is unavailable. Some accounts are being filed with missing TINs which causes difficulties because the system will respond that it has been submitted in an incorrect format. The ‘missing TIN’ cases are inevitably causing issues for users and HMRC and HMRC is waiting for feedback from the IRS later this year on how to resolve it. It may be deemed acceptable that the nine-zero approach continues in the short term.

I have received a FATCA renewal message, what do I do?

If you have received a FATCA renewal message for an FI (Financial Institution) from the IRS then you will need to login, check that renewal is not required and confirm that. For further information see p 84 of FATCA Online Registration, which says ‘FIs notified of the potential need to renew their agreement should login to the FATCA Online Registration System and view the ‘Renewal of FFI Agreement’ page … FIs must determine if they need to renew their agreement and then must submit their determination … All FIs should follow steps 1 through 4 below to determine if they must renew their agreement’.

What is the deadline for client notification?

The UK Client Notification Regulations came into force on 30 September 2016. The obligation for practitioners to notify any clients with offshore accounts and assets that HMRC will soon begin to automatically receive data from over 100 jurisdictions relating to UK tax residents and their offshore accounts, in accordance with the UK’s automatic exchange of information agreements, must be met by 31 August 2017. See this STEP blog for more information.

STEP will continue to consult with HMRC on ongoing technical issues.

Resources:

Emily Deane TEP is STEP Technical Counsel

CRS reporting update, June 2017

Emily Deane TEPSTEP attended the most recent CRS Business Advisory Group hosted by HMRC and discussed the following issues:

FAQs

HMRC advised that new documents on the OECD portal have been published along with some additional FAQs.

Anti-avoidance

Members were interested to know when the OECD will publish its loophole paper which will review loophole reporting strategies.

HMRC advised it does not expect imminent changes to the OECD’s anti-avoidance strategy but does expect a review prior to that planned in 2019.

In the meantime, the OECD has launched a facility for parties to disclose CRS schemes which are potentially used to circumvent CRS reporting.

US TINs – invalid format

The number of the US Taxpayer Identification Number (TIN) to be submitted has to be in a certain format, otherwise the return will be rejected.

In some cases a nine-zero approach will be accepted but some accounts with missing TINs are causing difficulties having been submitted in an incorrect format. The ‘missing TIN’ cases are inevitably causing issues for users and HMRC. Members agreed that there will be problems next year when the nine-zero approach will no longer be accepted.

HMRC recognises these difficulties and has been liaising with the IRS regarding the TIN issues. A member also mentioned that the issue was being raised by industry groups in EU circles.

Invalid self-certifications

Members agreed that HMRC’s guidance is ambiguous if a self-certification is returned to the financial institution but contains errors. For example, would HMRC accept a self cert that had been returned, but not signed, in a time sensitive case?

HMRC declined to generalise on self-certification issues, stating that each example has to be judged on its own specific issues. It confirmed that it is up to the financial institution to decide whether it is satisfied that a person is non reportable. The financial institution should apply due diligence procedures based on guidance and common sense.

The mediation period and the cut off timing were also discussed. HMRC stated that it is up to the individual financial institution’s procedures as to the cut off. It was agreed that it can be a grey area with some contradictions, and in some cases the financial institution may need to decide whether a person is reportable, whilst the validation is undertaken. More clarity on this issue was requested from HMRC.

HMRC customer support

HMRC has been receiving increasing numbers of calls from clients of financial institutions, rather than the financial institutions themselves. This is causing problems, particularly when close to filing dates. As a result, HMRC has asked financial institutions to omit its contact details from notes that accompany the self-certifications, stating these are not relevant to clients and it does not have the resources to deal with additional queries.

STEP will continue to attend the periodic working group to discuss ongoing technical issues with HMRC.

Resources:

STEP Guidance Note: CRS and trusts
Live STEP webinar on ‘CRS and Trustees’ with John Riches TEP and Samantha Morgan TEP, 13 June

 

Emily Deane TEP is STEP Technical Counsel

CRS and Charities: January 2017 update

Donations boxHMRC hosted another Charities CRS working group on 16 January. The following issues were on the agenda for discussion:

Anti-Avoidance Rules

HMRC would like to refine its currently broad regulation regarding anti-avoidance. It is scheduled to discuss it with the compliance team shortly. It will also be reviewing the anti-avoidance issues surrounding donations channelled through other charites and some more detailed guidance is expected to be issued shortly thereafter.

Trust Guidance

HMRC is in the process of preparing some guidance with the OECD focusing on some of the grey areas surrounding trusts. STEP has produced a memorandum on the issues of concern on how the CRS is intended to apply to trusts, persons connected with trusts and trust assets. The memorandum sets out our understanding of the application of the CRS in certain circumstances and highlights points of uncertainty in the reporting framework. We have submitted the paper to HMRC and the OECD and hope that it will form part of the additional new OECD guidance.

Human Rights

HMRC has issued new guidance, Charities: Protection on Human Rights Grounds, which will assist charities concerned about the human rights implications associated with information they are required to report under the automatic exchange of information (AEOI) agreements. HMRC recognises that there may be cases where the threat to an individual’s human rights as a result of his or her information being exchanged may justify information being redacted from that transmitted. The guidance covers the redaction of information on human rights grounds; threats to human rights, and safeguards already in place; and how to apply for redaction of information, including the HMRC process and the documentation required.

STEP will continue to attend the periodic working group to discuss ongoing technical issues with HMRC.

 

Emily Deane TEP is STEP Technical Counsel

STEP puts CRS, transparency and public registers under the SIG spotlight

SIG Spotlight Session Nov 2016STEP hosted its annual Special Interest Group (SIG) Spotlight Sessions on 14 November in London, a day comprising six conference streams. SIGs provide opportunities for members to connect and advance their focused area of practice.

I attended the International Client SIG session, which focused on the needs of practitioners serving international clients with complex planning needs. The presentation was entitled ‘Moving Out, Moving In and Moving On: Key Movements for International Clients’. STEP members John Riches, William Ahern and Dr Angelo Venardos spoke on the topical issues surrounding CRS, transparency and public registers.

The Common Reporting Standard (CRS) continues to cause confusion in some key areas, and STEP is seeking clarification on a number of points surrounding settlors, beneficiaries, protectors, what constitutes a trust, controlling persons that are entities, charitable trusts and private trust companies. William Ahern and Dr Angelo Venardos discussed how CRS is being applied in Hong Kong and Singapore, and they touched upon the inconsistencies in the legislation compared to the UK, for example, anti-avoidance legislation, which is not as comprehensive as the UK’s.

Automatic exchange of tax information on a wide basis will unleash a deluge of confidential and highly sensitive personal financial information for transmission around the world. Differing jurisdictions may have differing issues to consider under these circumstances. Some jurisdictions may also need to consider if their data-protection laws are consistent with the commitments they have made with respect to CRS implementation. Conversely others may have to consider if the confidentiality obligations contained in their trust and banking laws are consistent with their CRS commitments.

The emergence of many corporate and non-corporate trust registers across the globe has caused privacy and compliancy concerns among most practitioners, although the recent non-constitutional ruling of the French trust register may have an influential outcome across Europe in that respect. We continue to wait and assess the new challenges as they arise in this upcoming new era of transparency.

However, the consistent theme across most jurisdictions is the urgent need to consider which jurisdictions are fit and proper to be granted access to an individual’s financial details.

About STEP’s Special Interest Groups

STEP’s SIGs focus on some of the more complex issues families face in planning for their future, including international families, protection of vulnerable people, family businesses and philanthropic giving.

The groups aim to benefit the practitioner, their area of specialisation, the clients they serve, and the industry at large. They are also open to professionals who are not STEP members.

The SIGs are:

• Business Families
• Charities
• Contentious Trust and Estates
• Cross-Border Estates
• International Client
• Mental Capacity
• Philanthropy Advisors

Please see this page for more details: www.step.org/sigs

 

Emily Deane TEP, STEP Technical Counsel

CRS and Charities October update

Emily Deane TEPHMRC hosted another Charities CRS working group on 12 October. The following issues were on the agenda for discussion:

Human Rights Guidance

  • HMRC has been collecting examples from the working group to increase transparency and address concerns where the exchange of information could put individuals at risk. Its new guidance has addressed some of these concerns.
  • It was pointed out that HMRC has highlighted the absolute rights within the Human Rights Act, but it does not refer to the qualified rights of individuals, and these should also be considered.

Discretionary Management

  • Some discretionary management scenarios were discussed by the group and it was suggested that HMRC provide examples of these in its guidance.

    HMRC noted that it was difficult to provide examples to cover every scenario, because the facts of each individual case will determine whether or not it falls within the scope of CRS. However, it agreed to continue to refine its guidance where possible.

  • HMRC confirmed that simply setting parameters for an investment manager (for example that he/she may only invest in ethical investments) does not mean that discretion is retained by charity trustees.

Communications

  • HMRC will be producing a webinar for charities setting out a basic introduction to CRS, which should be available before December.
  • HMRC was asked to produce a proforma for charities to use when completing the self-certification process. It advised that while this was not possible, some examples on the OECD automatic exchange portal might be useful instead.
  • HMRC has been hosting some CRS Charity events in conjunction with STEP. If you would like more information please contact Emily.Deane@step.org

STEP will continue to attend the periodic working group to discuss ongoing technical issues with HMRC. The next meeting is in January.

 

Emily Deane TEP, STEP Technical Counsel

International Tax Compliance (Client Notification) Regulations

Emily DeaneThe UK’s International Tax Compliance (Client Notification) Regulations have been amended and will come into force on 30 September 2016.

The regulations create an obligation on financial institutions (banks, building societies, insurers, fund managers, wealth managers and professionals that offer tax or financial advice or services) to notify their clients about the tax information that HMRC will receive about their offshore affairs under international agreements.

Financial institutions are defined in the same way as in the Common Reporting Standard (CRS) and capture trusts that are financial institutions, however all charities are specifically excluded and will not have to notify their grant recipients.

Clients must be notified that:

  • Tax information must be shared with HMRC regarding their overseas assets under the Common Reporting Standard (CRS),
  • There are opportunities for clients to voluntarily disclose information about their overseas tax affairs if they need to; and
  • There are likely to be sanctions for those who do not come forward.

The notifications are targeted at practitioners who provide advice about offshore assets or income which is not disclosed in their clients’ tax returns. The affected clients are UK tax residents for whom the practitioner has provided offshore advice or services for a period of up to one year, or up to three years ending on 6 April 2016 (depending on the nature of the advice given).

While the wording of HMRC’s notifications has not been finalised yet, the notifications must be sent to clients by 31 August 2017 with a covering letter from the practitioner using set wording provided by HMRC.

HMRC has no objection to notifications being sent out to every client in the firm’s database if identifying individuals is too time-consuming or onerous. Failure to do so by 31 August 2017 may result in a £3,000 fine.

STEP will provide an update once further guidance from HMRC is available.

 

Emily Deane TEP, STEP Technical Counsel

CRS and charities: watch out for reporting obligations

George HodgsonThe OECD Common Reporting Standard (CRS) is probably going to impact directly every STEP member outside of the US – the only major international financial centre not so far committed to joining the CRS. Even STEP members in the US, however, are likely to have to consider CRS’ implications for any clients they have with widely spread financial interests.

Fortunately, CRS is very closely based on FATCA, so most of the work practitioners have done on FATCA implementation over the past couple of years should serve them well when it comes to CRS implementation over the next year or two. There are, even so, a couple of wrinkles in CRS which might trap the unwary.

One difference is that some of the reporting options available to trusts which are considered Financial Institutions (FIs) under FATCA, specifically ‘owner documented’ status and ‘sponsored investment entity’ status, are not available under CRS. Basically, under CRS, trusts that are FIs can either be trustee-documented trusts or must report directly, although they can come to third party service agreements with others to complete their reporting for them if they wish.

Another potential trap is that while all regulated charities were essentially exempt from FATCA reporting, some charitable trusts will need to file reports under CRS.

Charitable trusts that are Non-Financial Entities (NFEs) are regarded as Active NFEs under both FATCA and CRS and are therefore not reportable. Under FATCA, charities that are FIs were also carved out as ‘Deemed Compliant Financial Institutions’ and thus did not need to register or report. Under CRS, however, such charitable trusts do not have ‘Deemed Compliant’ status. Thus, under CRS, charitable trusts that are FIs – typically because they have a discretionary fund manager – will need to perform due diligence, establishing the tax residence of all Controlling Persons (including beneficiaries) and report any reportable accounts.

STEP recently arranged a meeting between some charity advisors and HMRC on this issue and HMRC are now looking to draft some additional guidance for the charity sector in the issues raised by CRS. In drafting this guidance HMRC would welcome further input from practitioners. Therefore, if you have encountered any specific difficulties or have any particular questions, please contact STEP and we will undertake to pass them on to HMRC as they are drafting their guidance.

George Hodgson, Deputy Chief Executive, STEP