A CrowdJustice case owner, Jenny, is bringing a case against HMRC over FATCA. Jenny is a US born British citizen and this law requires banks to send all her personal and financial information to US authorities on an annual basis.
But just what is FATCA, how did it come about and why should it matter to you?
What is FATCA?
- In 2010, the US introduced a law called the Foreign Account Tax Compliance Act, FATCA, that requires foreign banks to report on any US citizen to the IRS, including Americans living in the UK, dual-citizens and US-born British citizens. FATCA was extended to the UK in 2012.
- FATCA was introduced following banking scandals involving rich Americans hiding money in offshore bank accounts.
- FATCA operates without exceptions: I do not have offshore accounts and am not rich. Any US citizen, including "Accidental Americans" (foreign citizens who were born in the US and have left the US as young children) and other US-born British citizens, like me, are subject to FATCA reporting, independent of any actual US tax liability. All it takes is for an American citizen to have a bank account 'offshore' which, in the case of the 9 million US citizens living abroad, is likely to mean a local bank account.
"FATCA’s intrusiveness raises serious privacy issues"
- The above is a quote from The Economist ('Taxing America’s diaspora - FATCA’s flaws: America’s new law on tax compliance is heavy-handed, inequitable and hypocritical'), which deemed the legislation "overkill".
- Concerns have also been raised by the European Commission in letters sent to Accidental Americans, as well as by various European data protection authorities, one of which wrote in 2012 that "a bulk transfer of all these data is not the best way to achieve the goal [of fighting tax evasion]. Therefore, more selective, less broad measures should be considered in order to respect the privacy of law-abiding citizens".
- Even the European Parliament weighed in with a 46 page report in which it concluded that FATCA is incompatible with the principles of the GDPR.
- US agencies also have reservations about the compliance burdens caused by FATCA to compliant citizens, and the president of the French banking association warns that French banks may face no choice but to close 40,000 accounts of 'Accidental Americans'
Data Protection – a fundamental human right
- Despite the European data protection authorities raising serious concerns about compatibility with European laws, the Government ignored them and HMRC signed the treaty that extended FATCA to the UK.
Common Reporting Standard and Beneficial Ownership registers
- In 2017 the EU copied FATCA by rolling out the Common Reporting Standard (CRS) – once again against the advice of European data protection authorities. Notwithstanding the advice, the EU is now going one step further, with the publication of people's personal details in open registers of "beneficial ownership".
Useful links
The Guardian, 'British Citizens born in the US risk having UK bank accounts frozen' (25 August 2019)
Dutch Bankers Association, 'Banks will no longer be able to accept your business' (8 May 2019)
Investment Europe, 'Fatca could push French banks to close up to 40,000 accounts' (15 August 2019)
The Economist, 'FATCA's Flaws – Taxing America's diaspora' (28 June 2014)
European Parliament, EU FATCA report (14 May 2018)
Mishcon de Reya LLP, The Big Debate: Transparency Versus Privacy