|Deadline Imminent for UK Non-doms to Opt out of Automatic Account Reporting|
UK-resident non-domiciles only have a few days left to opt out of having full details of their Cayman or BVI financial accounts reported to HM Revenue and Customs, under Britain's automatic reporting agreement with these jurisdictions.
The agreements were signed in November 2013, creating reporting obligations similar to those in the US Foreign Account Tax Compliance Act (FATCA). Financial institutions in the Crown Dependencies and British Overseas Territories would begin reporting to the UK on all accounts owned by UK tax residents, starting with the 2014-15 UK tax year.
However, the agreements also contain a key concession for UK-resident non-doms – namely that distributions made by offshore trusts need not be disclosed if they are not remitted to the UK. This concession, called the Alternative Reporting Regime (ARR), is only available to non-doms who have elected to be taxed in the UK on the remittance basis. Moreover, it is only available on an opt-in basis. Individual non-doms who elect for the Alternative Reporting Regime must contact the financial institution that holds their account, and self-certify their UK tax status.
The deadlines for this election is 31 May 2015 in the BVI and 29 May 2015 in the Cayman Islands. (The Cayman deadline was originally set at 30 April 2015 but was extended when the US FATCA deadlines were extended.)
However, the matter is not entirely in the control of non-doms themselves. An election to use the ARR must be made not only by the accountholder but also by the reporting financial institution – including trustees of trusts. If the financial institution does not so elect in time for the deadlines, its non-dom clients (or beneficiaries) will not be able to avoid automatic reporting of their assets to HMRC. There are in fact many trustees who have chosen not to offer this facility to beneficiaries, so those non-doms will have to disclose their distributions.
Financial institutions and trustees who do elect for ARR must send their elections to the tax authority of the relevant jurisdiction – in this case either the Cayman Tax Information Authority or the BVI International Tax Authority. They must provide the name, address and, where available, date of birth and national insurance number of any investors who make an ARR election.
• In any case, the ARR concession is only available for a limited time. By 1 January 2016, the UK will be operating under the OECD's Common Reporting Standard for automatic information exchange, which does not include a non-dom opt-out. All distributions will then have to be disclosed, whether remitted to the UK or not.
The opinions expressed do not constitute investment advice and specialist advice should be sought about your specific circumstances.
Published on our website on May.27, 2015