New Benefits for UK charities investing in the United States

The US and UK Governments announced on 14 September that they had entered into the first of the intergovernmental agreements under the US Foreign Account Tax Compliance Act (‘FATCA’) rules initially proposed with the G5 countries, all of which have comprehensive tax treaties with the US with automatic information exchange authority. The bilateral agreement (the ‘Agreement’) to implement FATCA should provide much needed relief for UK charities investing in the United States and seeking to avoid FATCA withholding and compliance. The Agreement is based on the authority of Article 27 of the US/US Double Taxation Convention and, broadly, provides that UK financial institutions and certain other taxpayers can satisfy their FATCA compliance obligations by filings with HMRC rather than with the Internal Revenue Service and streamlines certain compliance aspects.

Under the proposed regulations issued by the Internal Revenue Service in February 2012, which are discussed in more detail in our client alert, various procedures are provided for non-US charities and exempt organisations to certify that they are outside the scope of regular FATCA reporting. These procedures generally require the provision of an opinion of either US counsel or counsel qualified in the jurisdiction in which the charity or exempt organisation is organised.

Under the Agreement all UK charities that are registered with (i) the Charity Commission of England & Wales, (ii) the Office of the Scottish Charity Regulator or (iii) HMRC as a charity or a community amateur sports club are “deemed compliant” for FATCA purposes. This should mean that there is no requirement to obtain a separate opinion of counsel for FATCA purposes. Rather, presumably pursuant to updated US tax withholding forms (also known as ‘W-8’ forms), a UK charity should be able to certify its relevant registration. However this will not affect the existing requirements under the regular US withholding tax provisions.

Richard Cassell
+44 (0)20 7597 6173

Kristin Konschnik
+44 (0)20 7597 6436

Jaime McLemore
+44 (0)20 7597 6590

Category: Article