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FATCA - International Bar Association Conference

The International Bar Association's  24th Annual Conference on the Globalisation of Investment Funds took place between 9 and 11 June.I was invited to speak on the latest developments in the UK on The International Bar Association's  24th Annual Conference on the Globalisation of Investment Funds took place between 9 and 11 June.

I was invited to speak on the latest developments in the UK on FATCA, including HMRC's newly published Guidance and the latest draft Regulations implementing the US:UK Intergovernmental Agreement.  The Guidance can be found here.  The Regulations can be found here.

There was an interesting discussion with fellow speakers, including Steve A. Musher, Associate General Counsel of the IRS, particularly as to the FATCA treatment of fund structures and the likely proliferation of FATCA style agreements.

Fund documentation will need to be checked to ensure that FATCA requirements are addressed.  For example, provision will be needed to:

1. explain in the PPM what obligations (and risks) investors will face;

2. set out Investors' information provision obligations, both in their application form and in the operative fund documents;

3. protect the Fund and other investors from other investors not complying with their information obligations - eg permitting FATCA withholding, providing for indemnities and proving for forced reclassification or redemption of units; and

4. set out who will be responsible for gathering and collating information and for submitting it to the appropriate tax authorities.

Additionally, systems will need to be made ready for the introduction of FATCA, and FATCA-style agreements multijurisdictionally. 

None of this can happen very quickly - for example, changing computer systems takes time - and it was worrying to hear from other delegates that other jurisdictions have a long way to go before their FATCA approach will be settled.  For instance, whilst the UK was the first off the blocks in agreeing an intergovernmental agreement with the US, many other jurisdictions are still at the early stages of that process, which begs the question as to what financial institutions should do where an agreement is expected but is not in place by the FATCA start date of 1 January 2014. 

It is to be hoped that the IRS takes a realistic view of the problems faced by foreign financial institutions in this area.

 

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