IEIM400020 - Background: AEOI Regimes

Automatic Exchange of Financial Account Information

Globalisation of the financial sector now makes it much easier for individuals and entities to hold money and assets outside of their jurisdiction of tax residence. While the great majority comply with their tax obligations there are some who will use the availability of offshore financial structures to evade tax.

Automatic exchange of financial account information is about improving transparency in the fight against tax evasion and in so doing protecting the integrity of the tax systems of the participating jurisdictions. The UK is party to a number of international agreements designed to provide tax administrations with details of financial accounts and assets, owned by individuals and entities that are resident for tax purposes in their jurisdiction, but which are held by financial institutions in the other territory.

For this to work the UK Government has introduced legislation that imposes obligations on the UK financial sector to review and collect details of accounts held by persons that are tax resident elsewhere and report this to HMRC for onward transmission under the exchange of information articles in the various treaties and conventions to which the UK is party. In return, those jurisdictions supply HMRC with similar information on UK tax resident individuals and entities holding accounts with their Financial Institutions.

The UK now has legislation in place for automatic exchange of financial account information under two regimes:

  1. The United States Foreign Account Tax Compliance Act – FATCA [see IEIM400040 ]
  2. The Common Reporting Standard developed by the OECD – CRS [see IEIM400080]

The UK is also party to a number of non-reciprocal automatic exchange of information agreements under which the UK receives information but is not obliged to report to the other jurisdictions.

Previous regimes:

Prior to 1 January 2021, the UK automatically exchanged financial account information with EU Member States under the Directive on Administrative Cooperation in Tax Matters 2011/16/EU, and with the territories of Andorra, Lichtenstein, Monaco, San Marino and Switzerland under EU-wide agreements. Following the end of the transition period on 31 December 2020 these arrangements no longer apply to the UK, but UK will continue to exchange financial account information with all of these jurisdictions under the CRS.

In 2015 the UK entered into arrangements with the Crown Dependencies of Guernsey, the Isle of Man and Jersey and the Overseas Territory of Gibraltar to reciprocally eachange financial account information. The International Tax Compliance (Crown Dependenciesand Gibraltar)(Amendment) Regulations 2015 (the CDOT Regulations) imposed reporting obligations on UK Financial Institutions for this purpose. However, for reporting in respect of 2017 and subsequent years, reporting under CDOT Regulations is fully superseded by the CRS. Financial Institutions should report under The International Tax Compliance Regulations 2015 (as amended) only, pending repeal of the CDOT Regulations.

The remainder of this guidance refers only to the FATCA and CRS regimes.

HMRC is responsible for ensuring that UK Financial Institutions comply with their obligations under the relevant legislation. This guidance is intended to provide HMRC staff with an understanding of the requirements that UK Financial Institutions must fulfil to comply with those obligations and to aid businesses that may have responsibilities to review, collect and report information under the regulations. It is also intended as a reference source for Financial Institutions and tax professionals for use alongside the Commentaries to the CRS.