FATCA International Agreements: US and UK Release Joint FATCA Intergovernmental Agreement

Sullivan & Cromwell LLP - September 20, 2012

On September 14, the US and UK governments announced that they had—on September 12—signed an agreement (the “UK Agreement”) to implement FATCA in the UK. The UK Agreement closely follows the “reciprocal” version of the model agreements (the “Model Agreements”) released on July 26, which were developed by the US Treasury Department in consultation with France, Germany, Italy, Spain and the United Kingdom. The UK government intends to include legislation implementing the UK Agreement in its 2013 finance bill.

Under the UK Agreement, in addition to collecting and reporting information about “US accounts” to the US authorities, HM Revenue and Customs (“HMRC”) will be entitled to receive information regarding US-based accounts held by UK residents from the United States. As anticipated, the UK Agreement populates “Annex II,” the section of the Model Agreements that had been left empty so that appropriate local entities and products not subject to FATCA reporting could be identified. In addition, the UK Agreement includes a “most favored nation” clause under which the UK will be entitled to the benefit of any terms included in any other FATCA intergovernmental agreement that are more favorable than those included in the UK Agreement. Apart from these provisions, however, the differences between the UK Agreement and the “reciprocal” Model Agreement are minor.

In a related development, HMRC launched a consultation (the “Consultation”) on the UK Agreement on September 17, which will last ten weeks and close on November 23. The Consultation both announces details regarding HMRC’s plans for implementing the UK Agreement and asks interested parties for comments.