The UK-US Automatic Exchange of Information Agreement: What You Need to Know
The UK-US Automatic Exchange of Information Agreement, also known as the “Intergovernmental Agreement (IGA) on the Improving International Tax Compliance and Implementing FATCA,” is a treaty between the United States and the United Kingdom aimed at improving tax compliance and reducing tax evasion. Signed in 2014, the agreement requires financial institutions in both countries to share information about their customers who hold accounts in the other country.
The agreement is based on the US Foreign Account Tax Compliance Act (FATCA), which requires foreign financial institutions to report information about US account holders to the Internal Revenue Service (IRS). The UK-IGA is a reciprocal agreement that requires US financial institutions to report information about UK account holders to the UK tax authorities.
Under the agreement, financial institutions in both countries will be required to identify and report information about accounts held by individuals who are residents or citizens of the other country. This includes account balances, interest income, dividends, and other income earned on the account.
The information exchange is automatic, meaning that financial institutions will be required to report the information to their respective tax authorities without the need for individual requests or investigations. This will make it easier for tax authorities to identify individuals who are evading taxes by holding assets offshore.
The UK-US Automatic Exchange of Information Agreement is part of a larger effort to combat tax evasion globally. The Organization for Economic Cooperation and Development (OECD) has developed a common reporting standard for the automatic exchange of information between countries, and many other countries have signed similar agreements.
The agreement is expected to have a significant impact on individuals who have accounts in both the US and UK. Those who have failed to report their offshore accounts or income to the relevant tax authorities could face penalties and other sanctions. However, the agreement also provides a framework for individuals to come forward voluntarily and disclose any previously undisclosed accounts or income.
In summary, the UK-US Automatic Exchange of Information Agreement is an important step in improving tax compliance and reducing tax evasion. The automatic exchange of information makes it easier for tax authorities to identify and pursue individuals who are evading taxes by holding assets offshore, and provides a framework for individuals to come forward and disclose previously undisclosed accounts or income.