Weekly Tax Update - September 21, 2015

1 General news

1.1 Draft guidance on automatic exchange of financial account information

HMRC has published its draft guidance on the implementation of common reporting standards for automatic exchange of financial account information.

The guidance covers the Common Reporting Standard (CRS) and the incorporation of the CRS into EU law. Once finalised it is intended to incorporate amended and updated versions of the existing guidance on FATCA and the Crown Dependencies and Overseas Territories (CDOT) arrangements.

The guidance does not replace or override the CRS Commentary, but brings together the key concepts and provides additional guidance for UK-specific issues, including where there are differences between the CRS, FATCA, and CDOT rules.

One point of difference highlighted is in connection with the potential application of the rules to trusts concerning when a trust will be regarded as resident in the UK for the purposes of an agreement. The guidance comments:

for CDOT and the Directive on Administrative Cooperation purposes, if one or more of the trustees are resident in the UK for tax purposes then the trust is UK resident unless the trust is resident for tax purposes in another jurisdiction with which the UK automatically exchanges financial account information and the trust reports details of Reportable Accounts to that jurisdiction; for FATCA purposes a trust will be regarded as resident in the UK for reporting purposes where most or all of the trustees are resident in the UK for tax purposes. Where some of the trustees, but not all, are UK tax resident, then the Trust is also to be treated as UK resident if the settlor is both resident and domiciled in the UK for tax purposes. www.gov.uk/government/publications/informal-consultation-guidance-notes-for-the-automatic-exchange-of-financial-account-information

www.gov.uk/government/uploads/system/uploads/attachment_data/file/461418/Guidance_Notes_for_the_Automatic_Exchange_of_Financial_Account_Information.pdf

1.2 HMRC concludes consultation on penalties

HMRC has published a summary of the responses to a discussion document it issued on 2 February 2015 on how to improve the tax penalty regime.

This document summarises characteristics that HMRC (and the respondents) consider should underpin any new penalty regime.

Penalties should:

encourage compliance - they should not be intended to raise revenue; be proportionate to the offence; be applied fairly; be a credible threat through being...