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VII.Tax
Revised European Directive on Administrative Cooperation (“DAC”), which establishes procedures for implementing the CRS in the European Union; and
U.S. Foreign Accounting Tax Compliance Act (“FATCA”).
The Crown Dependencies and Gibraltar Regulations, which imposed due diligence and reporting obligations for U.K. businesses in relation to accountholders who are tax resident in the Isle of Man, Guernsey, Jersey and Gibraltar, will shortly be disapplied. The U.K. agreements for the automatic exchange of information on financial accounts with Bermuda, the British Virgin Islands, the Cayman Islands, Anguilla, Montserrat and the Turks & Caicos Islands will remain in place.
All three reporting regimes are very similar in nature and terminology, and the Regulations attempt to unify, as much as possible, the due diligence and reporting requirements. Those entities familiar with FATCA will find that similar outcomes arise under CRS and DAC.
The regimes essentially impose an obligation on the U.K. financial sector to review and collect details of accounts held by individuals that are tax resident elsewhere. The information is reported to HMRC, which may then forward it under reciprocal exchange of information arrangements with other jurisdictions.
This may impact insurance companies in several ways. For example, companies regarded as financial institutions that issue cash value insurance contracts (being investment products with an element of life insurance attached to them) will need to review these arrangements to determine if they are reportable accounts. Retirement and pension accounts, individual savings accounts and certain share option schemes are excluded accounts for reporting purposes. Insurance companies that sponsor investment vehicles in which individuals can invest may also need to review the arrangements for disclosure purposes. More generally, there may be disclosure obligations whenever a bank account is opened in London, including in relation to custody accounts and paying agent accounts.
3. Corporate Tax Strategy
The draft Finance Bill 2016, published on December 9, 2015, contains provisions requiring large businesses to publish their
Developments and Trends in Insurance Transactions and Regulation 2015 Year in Review
tax strategies online. It was stressed in the consultation paper that these measures are separate from CBCR and the BEPS Project. The measures apply to companies and partnerships (but not open-ended investment companies and investment trusts) that satisfy any of the following conditions:
any U.K. partnership with turnover of more than £200 million or a balance sheet total of more than £2 billion;
a standalone U.K. company that, in the previous financial year, had turnover of more than £200 million or a balance sheet total of more than £2 billion;
a group (meaning a group of relevant bodies at least two of which are companies and includes all 51% subsidiaries) headed by a company incorporated in the U.K. (a “U.K. group”) that, in the previous financial year, had group turnover exceeding £200 million or a group balance sheet total over £2 billion;
a U.K. sub-group of a qualifying MNE group that is not a U.K. group. A qualifying MNE group is any MNE group that has mandatory reporting obligations under CBCR (that is, a consolidated annual group revenue in the preceding year of £586 million or more);
A U.S. sub-group of a qualifying group that is not a U.K. group. A qualifying group is any group that is not an MNE group with a group turnover of more than £200 million or a group balance sheet total more than £2 billion; or
a U.K. company that is a member of a qualifying MNE group but not a member of a U.K. sub-group.
The U.K. company (or any U.K. company in the U.K. group or U.K. sub-group) must publish its corporate tax strategy for a financial year before the end of the following financial year. The information must be freely available to the public online for at least 12 months. It can be a separate document or a self- contained part of a wider document.
Corporate tax strategy refers to the U.K. company’s (or U.K. group’s or U.K. sub-group’s) approach to risk management and governance in relation to U.K. taxation, attitude towards tax planning so far as it affects U.K. taxation, the level of risk in
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