US tax Preview 2017
This is the age of tax transparency, across all borders. The days of tax evasion have been limited since the onset of the US Foreign Accounts Tax Compliance Act (FATCA) nearly a decade ago.
FATCA & CRS
It is off the back of FATCA that the current efforts surrounding the various Automatic Exchange of Information (AEOI) programs have occurred. The FATCA Intergovernmental Agreement (IGA) model spawned the increasingly accepted OECD Common Reporting Standard, or as it is now popularly referred to…CRS.
In November we introduced this term in more detail, but basically, CRS is designed to standardise which information on a client’s financial accounts is disclosed and how it is distributed to the participating countries. CRS allows those countries to share these details with all participating countries in each Competent Authority Agreement (CAA). As of November 2016, the OECD reported 87 countries in the Multilateral CAA, of which the UK is a member, and 53 of those go into effect in 2017.
THIS is the focus of our immediate tax future. CRS makes sharing this information easier when distributed to all at once, but ‘announcing’ the details in this way may also make it faster to find people not compliant with their tax liabilities altogether. This is particularly pertinent to US persons as they are taxed on citizenship rather than residency.
The US Voluntary Disclosure programs will also remain a focus this year as more countries participate in CRS and this data is further shared around the world. The sudden closure of these programs, which allow taxpayers the chance to get back into the system and become compliant (sometimes without penalty), is still a great risk for those who continue to keep their heads in the sand.
THE ELEPHANT IN THE ROOM…
It is not yet certain what changes will come about with the new US administration and how these will affect the US and other tax systems. There is speculation, of course, but eliminating existing programs such as the Overseas Voluntary Disclosure Program (OVDP) or the Streamlined Voluntary Disclosure program could be part of President Trump’s tax reform making compliance even more of an urgency.
In the UK, HMRC has imposed obligations on financial institutions and tax advisors who provide ‘offshore advice’ to clients, to issue a notice – ‘client exchange of tax information – to their clients by 31 August 2017 to ensure appropriate disclosure is made. A penalty of £3000 will be imposed for failure to comply. Clients must ensure that their tax returns are in line with the information being shared with participating countries through CRS, as discrepancies could raise a red flag and potentially lead to a tax audit.
There will be the typical fluctuations in exemptions for the 2016 tax year in 2017 as well, which we will outline in due course, but COMPLIANCE is and continues to be, the common tax goal…2017 will be no different.
If you have any concerns about your tax compliance, contact us.