Ernst & Young has questioned some platforms’ attitudes to complying with the US Foreign Account Tax Compliance Act, warning they have failed to understand its impact on their businesses.
Money Marketing revealed last week that just three big platforms – Fidelity FundsNetwork, Skandia and Standard Life – have said they will continue to accept business from US taxpayers based in the UK because of onerous reporting requirements under Fatca. This could curtail advisers’ ability to place US business on platforms.
Fatca aims to tackle tax evasion by US taxpayers through the use of foreign accounts. The rules require foreign financial institutions to report certain information about financial accounts held by US investors from 30 June 2013.
Cofunds and Ascentric are not accepting new business from US taxpayers. Transact has not yet made a decision and Novia and Aviva only deal with UK business.
But E&Y financial services advisory partner Dan Hall (pictured) says: “Just barring US investors will not help platforms escape the Fatca burden.”
Firms that do not comply with Fatca face a 30 per cent withholding tax on US assets. Hall explains even where platforms do not accept business or hold assets for US investors Fatca will require new account opening procedures and systems to flag potential US taxpayers, and if necessary firms will need to request further documentation.
He adds: “Platforms have obviously had a lot of pressures on them recently, particularly given the changes required under the retail distribution review. Our experience is most firms and platforms have been focused on those kinds of issues. With the first deadlines coming in to comply with Fatca next year, now is the time to start understanding the detailed requirements of what firms need to do.”
Tower Hill Associates director John Lang says: “The US jurisdiction seems to spread its tentacles in all sorts of directions. Advisers need to be on their guard and understand the repercussions of taking on US business.”