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US and UK sign agreement to implement FATCA

On 12 September 2012, the US and the UK signed an agreement to improve international tax compliance and implement the US Foreign Account Tax Compliance Act (FATCA). The terms of the agreement are nearly the same as the reciprocal Model l agreement released in July 2012.

Annex II of the agreement, which may be updated by mutual agreement, lists the UK financial institutions that are FATCA non-reporting entities treated either as exempt beneficial owners or deemed-compliant foreign financial institutions, and the UK financial products and accounts that a US person may hold for which UK financial institutions need not provide information to the US. Annex II essentially removes “retail” institutions and products from the scope of FATCA.

The agreement will enter into force on the date on which the later of the parties to complete its ratification procedures notifies the other of their completion. On 18 September 2012, the UK government launched a consultation on implementing the agreement in the UK. Draft legislation for this purpose will be published shortly.