UK financial institutions (FIs), including private fund managers, that do not have US-reportable accounts will not be required to submit annual “nil returns” in order to comply with the Foreign Accounts Tax Compliance Act (FATCA).
The change comes after the US Internal Revenue Service (IRS) released an FAQ confirming that it does not require nil returns other than from Direct Reporting Non-Financial Foreign Entities, but acknowledged that some Intergovernmental Agreement (IGA) countries may require nil returns to be submitted locally, KPMG noted in a client memo.
UK tax authority HMRC subsequently announced that nil reporting will not be required for its IGA with the US and that it intends to release further information on an amendment to UK tax law. Registered UK FIs may still choose to make nil returns until this amendment takes effect, likely by the end of April 2015.
It remains to be seen whether other countries follow the UK’s lead and reduce requirements for nil returns. The amendment will not impact any UK FIs that are required to complete returns detailing information about US Specified Persons, due with the HMRC by the end of May 2015.
The HMRC’s decision corresponds with the EU Directive of Administrative Cooperation, the proposed OECD Common Reporting Standard (CRS) and the agreements with the Crown Dependencies and Overseas Territories, all of which do not require the submission of nil returns.
“This consistency is welcome as it will significantly reduce the number of financial institutions that have to file a report,” said the KPMG memo.