Leading private client software developers, thewealthworks, has become the first supplier to introduce a new element to assist financial institutions with their obligations under the US Foreign Account Tax Compliance Act (FATCA).
FATCA was enacted in 2010 by Congress to target non-compliance by U.S. taxpayers using foreign accounts. It requires foreign financial institutions to report to the IRS information about financial accounts held by U.S. taxpayers, or by foreign entities in which U.S. taxpayers hold a substantial ownership interest. In 2012, rules relating to reporting and withholding were released.
Mick Jones, managing director of thewealthworks said:
“This type of international information exchange legislation is growing and not unexpected in the financial sector. In fact, HMRC recognise the advantages it would have for the Treasury and have drawn up their own model.
“However, many law firms and accountancy practices that deal with trusts are yet to comprehend the impact that FATCA has on them and that they are legally bound to comply or face penalties. The IRS considers trusts or family investment entities that are ‘primarily’ engaged in the investing, reinvesting or trading in securities should themselves be considered FFIs and they need to comply.
“As it stands, trust companies will have to undertake significant work in classifying their trusts under US tax law. What we have done for users of our Troika wealth management software for UK Trusts, International Trusts & Companies and Family Office & Private Wealth, is to introduce new fields and screens to assist users with the new classification and registration requirements. The fields will be displayed for all client types including trusts, alongside additional fields for identifying US Persons within Troika for related individual entities.
“We will also be providing a series of additional reports to list clients and entities based on selected nationality, jurisdiction and citizenship criteria. These will assist Troika users with the identification stage of FATCA regulations, and then record the registration details for both Foreign Financial Institutions; both reporting and non-reporting, and Non-Financial Foreign Entities.
“We see these innovations as tools for supporting users but they will not include an automated tool or software to determine client classification and registration in line with the FATCA regulations. That final decision must rest with the client.”
