HMRC letter regarding savings account

bowlhead99

mgdavid wrote: »

given the confusion of the OP that Colsten highlighted in post #2 I don't think it worth assuming anything

BeachNut wrote: »

Perhaps its the IRS that are chasing down their US citizens via HMRC for proper declaration if worldwide income.

The letter will be from the bank/ building society rather than from HMRC. Basically since 1 July, financial institutions around the world are dealing with the issue that 100+ world governments have signed up to collect information about the balances of US residents and US citizens holding accounts in those countries. In the UK, the way it works is that banks and brokers and investment funds will report account balances to HMRC, who will collect data to send over to the US. The banks have a certain time limit to review their existing investor base and prepare to report.

In a separate initiative between UK and its crown dependencies and overseas territories, our banks also have to report accountholders who are currently resident in Channel Islands, Isle of Man, Gibraltar but have accounts in the UK. Next coming down the line is the new OECD guidelines that will be implemented in Europe and a bunch of other places in a couple of years - these will result in HMRC collecting data about the balances in, and credits to, accounts of French residents, German residents, Spanish residents, etc etc etc. International tax information sharing and transparency is here to stay. Some institutions will simply choose to close accounts of US citizens and foreign residents which gives them less to report.

So, the US at the moment, and other countries in the future, want to know that Mrs X, who should be doing tax returns, has a load of assets in another country which might be generating foreign income and gains that should be reported to them.

US is a little unique in that it wants tax returns for life from anyone who is a citizen, not just someone who is currently a US resident. Everywhere else, filing taxes on your worldwide income is generally based on you being resident, so you typically only need to do tax returns to countries in which you're resident as long as you pay relevant local taxes wherever you earn them. So once the next round of rule changes are in, a German citizen living in the UK is not going to find his UK bank reporting on him to the German tax authorities, but a resident of Germany no matter where he was originally from, would expect to have his UK bank reporting to the German tax authorities to help with their audits and investigations.

So, bottom line, this is a request from the bank to help them with their HMRC compliance. If you were interested in further research, HMRC guidance to financial institutions is at http://www.hmrc.gov.uk/drafts/uk-us-fatca-guidance-notes.pdf , or just google 'FATCA'.

As others mentioned, if you want to settle somewhere outside the US and renouce your citizenship, you can do. By giving it up, you won't get help from US embassies as you travel around the world and if you want to visit the US or work there you may need a visa or visa waiver just like other people who aren't US citizens. There's a process to renounce your citizenship which usually involves ensuring you've filed the last X years tax returns before you walk away.

Historically a lot of people would just walk away and stay under the radar, effectively giving up on the US but not formally making a clean break. Now with FATCA etc, you have to certify your residency and US citizenship status when you open an account pretty much anywhere in the world with a bank or investment company, so staying under the radar is harder if you tell the truth on forms (and the banks have the right to ask for supporting documentation to support the forms if it seems inconsistent with what they know about you).

EdSwippet

bowlhead99 wrote: »

...US is a little unique in that it wants tax returns for life from anyone who is a citizen, not just someone who is currently a US resident.

Just the US and the 'one party state' of Eritrea.

Eritrea's rate on non-resident citizens is 2%, and well below the US's potential 39.6%. Eritrea provides a simple one-page form, but a US tax return is ofetn too complex for professionals and can easily bloat to over a hundred pages.

Global pushback against FATCA has begun. Canadian citizens have filed a lawsuit against their own government because the IGA contravenes the Canadian Charter. There is a human rights complaint against the US winding its way through the UN over the US's aggressive citizenship-based taxation and the way it rolls roughshod over international norms and other countries' domestic tax policies. US Republicans have passed a resolution to repeal FATCA. And even US Democrats, the party that brought us FATCA in the first place, have come out with a scathing report detailing the damage that FATCA is doing worldwide to both US and non-US interests.

bowlhead99

There is pushback but the US has been happy with its citizenship based taxation for a long time and is not just going to give up on that because the UN, in which the US has a loud voice, thinks it's not normal and allegedly violates someones rights. Someone who doesn't want to retain their rights as a US person can give them up if they don't want them any more (although they probably need to find someone else that will have them first...)

I don't see FATCA going away really, partly because many of the agreements the other countries begrudgingly signed with the US are reciprocal meaning that other countries (such as the UK) are due to receive information on their own residents having USA accounts in return from next year (even though US financial institutions themselves may be ill-prepared for the reporting).

Now all the financial institutions have put (or have started to put) their procedures in place at a cost of hundreds of millions and after having had it on the radar for a few years already, it's a bit late to think about simply dropping it. Cross-government information sharing to support tax monitoring and collection is the way the world is going these days: tax havens are no longer tax havens, secret swiss bank accounts are not secret. The EU's own 'savings directive' is being beefed up too - more reporting of interest income. Apart from the huge regulatory compliance cost, it's probably a good thing overall to have people follow rules and be transparent and honest about their dealings or get pushed into a smaller and smaller pool of options.

Even if the US decided it didn't really want to receive all the data about its citizens or residents who hold non-US accounts and would consider repealing FATCA, the OECD is full steam ahead with its own multilateral common reporting standard on tax information sharing; as a member of the G20 whose finance ministers signed that off earlier this year, the US would probably fall into line with that initiative in due course. That one is purely residence based reporting rather than seeking information about citizenship, but basically if you should be making a tax return somewhere, it will become harder and harder to not do one and not get noticed.

EdSwippet

bowlhead99 wrote: »

... That one is purely residence based reporting rather than seeking information about citizenship, but ...

Right. And if FATCA was purely residence based also then there would be no complaint.

The individuals being harmed by this -- and there are many -- are at the intersection of FATCA and the US's 'unique' citizenship-based taxation. Up to now US policy to tax citizens not living in the US could best be described as 'aspirational'. And the US itself had de-facto acknowledged this fact by making no serious attempt whatsoever to either enforce it or even make its citizens living abroad aware of their 'unique' tax status.

FATCA has awoken both predator and prey.

missile

She wants the benefit of being a US citizen and has been caught. It is time to pay her dues to Uncle Sam.

EdSwippet

missile wrote: »

She wants the benefit of being a US citizen ...

And the benefit would be what, exactly?

She doesn't drive on US roads, use US hospitals, or send her children to US schools. She has lived full time in the UK since the 1960's, and paid all her UK taxes and NI here. Her likely only contact with the US over the past half-century will have been passport renewal every decade or so, for which the US currently directly charges $110.

mgdavid

EdSwippet wrote: »

And the benefit would be what, exactly?.....

I was wondering that too; especially in today's global socio-political climate......

missile

EdSwippet wrote: »

And the benefit would be what, exactly?
.

Whatever, she is a US citizen and should abide by their rules and pay her dues.

EdSwippet

missile wrote: »

Whatever, she is a US citizen and should abide by their rules and pay her dues.

Even when the rules are obscure, asinine, inequitable and discriminatory? Should Rosa Parks have just got up and moved to the back of the bus?

"You assist an unjust administration most effectively by obeying its orders and decrees." ~ Mahatma Gandhi

missile

EdSwippet wrote: »

Even when the rules are obscure, asinine, inequitable and discriminatory? Should Rosa Parks have just got up and moved to the back of the bus?

"You assist an unjust administration most effectively by obeying its orders and decrees." ~ Mahatma Gandhi

I will have some of whatever drugs you are on.