A US law designed to prevent tax avoidance by US citizens could apply to the estimated 250,000 private family trusts established in the UK, a tax lawyer has warned.
Tax specialist Carol Cummins, from national law firm Clarke Willmott, explained that language differences between the US and UK could mean most lay trustees and advisers may be “blissfully unaware” that under the Foreign Account Tax Compliance Act guidelines, their clients “could be investigated as vehicles for wealth investment, regardless of whether there are any US connections”.
The FATCA measure applies internationally following agreement on information sharing between the world’s tax authorities. It means that trustees have to be registered with the US tax authorities by 25 October or risk falling foul of the law and be liable to penalties.
According to Ms Cummins, whether or not a US citizen is included, if the trust funds are managed by a third party such as a financial adviser, wealth manager or fund manager, this would be defined by the US Internal Revenue Service as a financial institution and thus would come under the reporting obligations detailed in FATCA.
Trusts holding property or investments that are not professionally managed should not need to register unless there are US beneficiaries or income.
Adviser view
Tony Gammon, client services director for national wealth manager Thesis Asset Management, said the introduction of FATCA had been a “key concern”, especially when dealing with trusts. He said: “It seems many working in this area of investment are uncertain about what FATCA means to them.”
