Tax Returns and Compliance

FATCA, or the Foreign Account Tax Compliance Act, is American legislation that is intended to prevent United States taxpayers evading tax by holding investments in offshore accounts.

US taxpayers who hold foreign assets valued over a certain threshold must report financial information about these assets along with their annual tax return. This threshold is:

• £50,000 if you live in the US and are unmarried or file taxes separately from your spouse
• £100,000 if you live in the US and file taxes jointly with your spouse filing jointly
• £200,000 if you live abroad and are unmarried or file taxes separately from your spouse
• £400,000 if you live abroad and file taxes jointly with your spouse.

You will be fined $10,000 if you fail to report foreign assets on your FATCA return, which increases to $50,000 if you still don’t comply after IRS notification. You will also receive a 40% penalty on any underpaid tax relating to your undisclosed assets.

There are a number of exceptions to the assets that you must report, such as what the IRS calls ‘Specified Foreign Financial Assets.’ Our solicitors can advise whether or not you can take advantage of these exceptions.

The CRS is a standard for automatic tax and financial information exchange between different countries, designed to help combat tax evasion.

All financial institutions that operate in participating countries must report certain customers’ financial information to local tax authorities. This applies to people, companies, trusts and other financial entities.

This means that banks and other financial service providers may ask you to provide certain details about yourself if you appear to be tax resident in another country. This usually happens when you sign up for a service, but you might be asked to update your information if they believe that your circumstances have changed.

Most countries tax you differently depending on whether you are considered ‘tax resident’ or not.

Tax residence is a different concept to actual residence. This means that you might legally be a tax resident in a country despite not considering it your home.

Tax residence is usually based on:

• Where you work
• Where your family lives
• Where the centre of your life is
• How long you are in the country
• If you own a home in the country
• How much money and assets you own in the country.

The different tax laws in different countries can sometimes conflict, which could mean that you are a tax resident in multiple countries or that you pay tax on the same income twice.

It’s important to plan your tax residence correctly to avoid paying more tax than you need to, we can help you do it. Just reach out to get started.

Everyone must pay UK tax on UK income, but your tax residence is what determines whether you pay UK tax on foreign income and capital gains.

Normal UK tax residents pay UK tax on foreign income and capital gains. Non-domiciled UK tax residents don’t pay UK tax on foreign income or capital gains if:

• They are less than £2,000 in the tax year
• They have kept them out of the UK and claim the remittance basis.

Non-residents don’t pay UK tax on any foreign income. They only pay capital gains tax:

• On UK residential property
• If they have previously had UK tax residence and become UK tax resident again.