In March 2010, the US Congress enacted the Hiring Incentives to
Restore Employment (HIRE) Act, which included provisions that are
known as the Foreign Account Tax Compliance Act, or FATCA. This was
aimed at preventing tax evasion by US persons through the use of
accounts held with foreign financial institutions. The Act requires
financial institutions across the globe to identify and report
certain information on US persons that have control over financial
accounts. Withholding tax on US sourced payments applies to any
financial institution that is not compliant.
In September 2012, the UK and the US signed an
Inter-Governmental Agreement (IGA) whereby UK financial
institutions would supply information on reportable US accounts to
HMRC who would then automatically exchange this information with
the US Internal Revenue Service (IRS). The benefit of this is that
financial institutions that are covered under an IGA are not
subject to the withholding tax on US sourced
