FATCA and CRS Reporting

What are FATCA and CRS?

The Common Reporting Standard ("CRS") came into effect at the start of 2016 in several countries including the UK and Ireland. Its goal is to help identify individuals who may have assets and income in other jurisdictions.

To help put this into context, CRS is commonly seen as an extension of the Foreign Account Tax Compliance Act ("FATCA") which was enacted in the U.S. in 2010 and introduced a framework for sharing tax information between different jurisdictions.

FATCA was designed to help identify U.S. citizens and residents with overseas assets or income and prevent tax evasion. Certain financial institutions worldwide have to register with the US Internal Revenue Service ("IRS") and will have to report customers with a US tax status.

This format has been adopted in more than 100 jurisdictions, including the UK, where it is now local law.

What does this mean for new customers?

Our savings and investment application forms include the question, 'Are you a tax resident or citizen of the USA?' This question must be answered. It is worth noting that the U.S. operates a citizen taxation system in contrast to most countries around the world who tax their residents. This means that someone who is born in the U.S. is typically required to file a U.S. tax return for the rest of their lives unless they renounce their citizenship. 

Please note that we cannot accept customers on the platform who are considered a U.S. person and which includes individuals who are a U.S. tax resident or U.S. citizen.

We will also ask several questions to identify whether new customers are tax resident in other jurisdictions. This allows us to meet our reporting responsibilities under UK legislation.

What does this mean for Trusts? 

These reporting requirements go beyond individual customers and affect entities such as trusts. From 2026 the trustees of certain trusts may need to register with HMRC under the Automatic Exchange of Information (AEOI) requirements.

For this purpose a  trust may be classified either as a Financial Institution or Non-Financial Entity depending on the circumstances, such as whether the trust has professional trustees, employs a Discretionary Fund Manager (DFM) and what investments it holds.  

Non-Financial Entity

The trusts that we have on our platform are set up as UK trusts with only UK tax resident individual trustees. Where the trust has no corporate trustee and has not delegated investment decisions to a DFM, we would typically expect the classification to be a passive Non-Financial Entity. 

A passive Non-Financial Entity (NFE) is defined as an entity that does not primarily engage in financial activities. It is classified as passive when it generates more than 50% of its income from passive sources, such as dividends, interest, rents, and royalties.

For NFEs we are required to establish who the controlling persons are and will issue a self-certification form to collect the relevant information that we may need to report to HMRC (in future). The trustees will not need to register directly with HMRC for AEOI. If the self-certification provider fails to provide a valid self-certification, they may be liable to a penalty. We are required to demonstrate best efforts in obtaining self-certification forms from our investors.

In a trust context a controlling person means a settlor, trustee, protector, beneficiary or class of beneficiaries, and any other natural person exercising ultimate effective control over the trust. If an individual performs more than one role all roles are to be disclosed as we may be required to report all roles.

Financial Institution

The definition of a Financial Institution under FATCA is quite lengthy and covers a range of different activities. For the purposes of trusts there are two key activities to focus on:

• where the institution holds financial assets for others as a substantial portion of its business,
• is primarily engaged in the business of investing, reinvesting or trading securities.

This would cover discretionary fund managers and professional trustees.

And if a trust meets the following two conditions it would typically be treated as a Financial Institution:

1. its gross income must be primarily derived, more than 50%, from investing, reinvesting, or trading in financial assets (or, from 1 January 2026, relevant crypto assets); and
2. it is managed by a Financial Institution (FI).

For example, if the trust invests in collective investment schemes and the trustees have delegated the investment decisions to a discretionary fund manager, then that trust would typically be treated as a Financial Institution. This is because all of its income is coming from the financial assets it holds. 

If the trust had professional trustees and held a bond where no withdrawals were being taken then, although it is managed by an FI, it doesn’t need to register because <50% of its income is coming from trading in financial assets.

With this classification we would not need to obtain controlling person information from the trust. However, the trust may need to register directly with HMRC under Automatic Exchange of Information (AEOI) requirements. 

If there are changes in the circumstances relating to the trustees, delegation of investment authority or related matters this may impact the classification of the trust so please let us know as quickly as possible.

Common scenarios for AEOI

Below is a table which summarises the most common trust scenarios and whether they might need to register with HMRC.

*A discretionary fund manager appointed by the bond provider does not bring the trust into these requirements

# Income sources are from financial assets which includes investments but not rental income, bank deposits or the 5% withdrawals under a bond which are seen as capital repayments. HMRC have indicated to us that, despite a bond not being considered as income producing for any other purpose, any gain could still count as income for the purposes of this test. Trustees holding a bond where a gain arises and a DFM and/or a professional trustee is involved should check this directly with HMRC

It is worth noting that we cannot provide tax advice and we recommend trustees obtain independent advice to confirm the correct classification and associated obligations to HMRC where relevant.

Where trustees have identified that they must register with HMRC then they can do so following this guidance Register for Automatic Exchange of Information - GOV.UK

More information can be found via the links below. Questions on specific circumstances can be referred to HMRC at aeoi.enquiries@hmrc.gov.uk

HMRC: Investment Entity: Trusts Managed by a Financial Institution

HMRC: Investment Entity: Trusts

Which products are affected?

We, in line with many other UK financial institutions, are responsible for identifying where customers are tax resident and, where required, to report their details to HMRC or the Irish Revenue. While these rules initially applied to U.S. persons overseas, over 100 countries have now signed up for similar arrangements with more expected to join in future.

Our new business applications, together with some of our servicing processes, have been changed to capture the information we need to comply with the requirements.

This affects most products. While pension plans and ISAs themselves are out of scope, additional questions must be answered for these products on our platform due to their associated cash accounts.

Are there any other categories?

There are other categories including international organisations, government departments and bodies covered by specific U.S. tax concepts. 

These categories are not included in our forms as in our experience, our customers fall into one of the categories mentioned above.

If you believe your business doesn’t fit with the categories on offer then please speak to your account manager or usual contact. 

This is a global requirement, and more information can be found via the links below.

HMRC guidance on automatic exchange of information Automatic Exchange of Information: introduction

List of jurisdictions signed up to CRS – the OECD website CRS by jurisdiction - Organisation for Economic Co-operation and Development