The International Tax Compliance (Crown Dependencies and Gibraltar) Regulations 2014

EXPLANATORY NOTE

(This note is not part of the Regulations)

These Regulations are made to give effect to four agreements to improve international tax compliance. The agreements are those made between the Government of the United Kingdom of Great Britain and Northern Ireland, and each of the Government of the Isle of Man (agreement signed on 10th October 2013), the States of Guernsey (agreement signed on 22 October 2013), the Government of Jersey (agreement signed on 22nd October 2013) and the Government of Gibraltar (agreement signed on 21st November 2013).

Regulation 1 provides for citation and commencement.

In regulation 2, paragraph (1) explains the purpose of the Regulations, and that the Regulations apply separately in relation to each of “the Isle of Man agreement”, “the Guernsey agreement”, “the Jersey agreement” and the Gibraltar agreement”; paragraph (2) defines those four terms, and explains that references to any of the agreements are to them as they take effect from time to time. Paragraph (3) defines the term “the relevant agreement” as it is used for the purpose of the Regulations, as referring to whichever of the four agreements referred to at paragraph (2) as the context may require. Regulation 2(4) provides that any expression defined in the relevant agreement but not in the Regulations or relevant sections of the Finance Act 2013 is to have the meaning that is has in that agreement.

Regulations 3 to 5 explain the scope of the Regulations, which apply to “reporting financial institutions” in relation to “reportable accounts” that those institutions maintain; a UK representative of a non-UK resident institution also has obligations under the Regulations.

Regulation 3(1) contains the basic definition of a “reporting financial institution”, as a person carrying on business in the United Kingdom as any of the following: a depository institution; an investment entity; a custodial institution; a specified insurance company. Paragraph (2) provides that, notwithstanding, an institution that is a “non-reporting financial institution” (as that term is defined in the relevant agreement – see regulations 2(4) and 19(4)) is not a reporting final institution for the purposes of the Regulations. “Depository institution” is defined at paragraph (3), “investment entity” at paragraph (4) and “custodial institution” at paragraph (7) (with subsidiary parts of that definition at paragraphs (8) and (9)). Paragraph (5) makes particular provision for the treatment of collective investment schemes (as defined in paragraph (6)).

Regulation 4 defines “reportable account”. Paragraph (1) contains the basic definition of that term. Paragraphs (2) to (4) make provision for a reporting financial institution to elect for a calendar year to treat certain accounts as if they were not reportable accounts. Paragraph (5) makes special provision for treatment of joint accounts under the Regulations.

Regulation 5 is concerned with the position of reporting financial institutions that are not resident in the United Kingdom. Paragraph (1) provides that in such a case the obligations of an institution are to be treated as if they were also the obligations of its UK representative. Paragraph (2) defines “UK representative” and paragraph (3) explains the concept of “resident”.

Regulation 6 requires reporting financial institutions to establish and maintain arrangements to identify reportable accounts. Paragraphs (1) and (2) contain the main obligation. Paragraphs (3) to (9) prescribe what a reporting financial institution has to do to meet the obligation (“the due diligence requirements”).

Regulation 7 modifies, in the case of the situations specified, the due diligence requirements at regulation 6, but only if a reporting financial institution elects under regulation 7(7) that those modifications are to apply.

Regulation 8 requires reporting financial institutions to make a return to an officer of Revenue and Customs in respect of every calendar year from 2014 onwards of “the required information” as specified at paragraph (4) and further described at paragraphs (5) to (8) (see paragraph (1)(a)), and of the institution’s Global Intermediary Identification Number as defined at regulation 19(1) (see paragraph (1)(b)). Paragraph (2) requires a reporting financial institution that maintains no reportable accounts to report that fact in its return. Paragraph (3) makes provision for the date by which an annual return must be made.

Regulation 9 modifies the information required under regulation 8(4) about certain accounts, for the calendar years 2014 to 2016.

Regulations 10 to 16 make provision for penalties for breach of obligations under the Regulations.

Regulation 17 makes provision for the treatment of accounts with a negative value.

Regulation 18 makes provision for the treatment of acts done for the purpose of avoiding obligations under the Regulations.

Regulation 19 is concerned with definitions to be used for the purposes of the Regulations.

A Tax Information and Impact Note covering this instrument will be published on the HMRC website at http://www.hmrc.gov.uk/thelibrary/tiins.htm.