The burden on firms located in the UK of complying with the US FATCA Act has become slightly less onerous.

The UK tax collection authority no longer requires what are deemed foreign financial institutions to file “nil returns” to the US Internal Revenue Service when they have no US reportable accounts.

The Society of Trust and Estate Practitioners, or STEP, said the move has been made by HM Revenue & Customs after it heard from industry groups about the burdens of complying with the US Foreign Account Taxation Compliance Act, or FATCA.

Even those foreign financial institutions (FFIs) which had no US reportable accounts have had to file “nil returns” with HMRC as part of the FATCA Act; this requirement has been scrapped, STEP said in a commentary on its website.

The development is a sign of how governments such as the UK, which have signed agreements with the US so that the FATCA Act can, at least in theory, be applied efficiently, have sought to make it less onerous. The controversial legislation is designed to chase after alleged US tax evaders living abroad and has been blamed for a number of financial institutions shutting the doors on US expats and Green Card holders living abroad. It has also been cited as a reason for wealthy US expats seeking to renounce their citizenship to break free from the clutches of the IRS.

"The US have recently clarified in their IRS FATCA FAQ pages that they are not expecting countries with whom they have entered into an Inter-governmental Agreement (IGA) to require their local FIs to file nil returns.  In view of this, and consistent with the expected position for the UK implementation of the Common Reporting Standard, HMRC will remove the requirement for nil returns to reduce ongoing burdens on business.  We will issue further advice regarding entities that have already registered with HMRC (whether or not they have reported yet) as soon as we can," a spokesperson for HMRC told this publication.

STEP said the HMRC move over the “nil returns” requirement did not get rid of the obligation on trusts, if they are classified as FFIs, to “ensure that they have met their obligations to register with the IRS or the requirement to conduct due diligence to ensure that there are no US persons connected with such trusts".

As a result of the change, HMRC will use the IRS list of registered foreign financial institutions as the basis for its compliance assessments rather than the nil returns.

The deadline for reporting US Reportable Accounts to HMRC remains 31 May this year, STEP said.

“Very few UK trusts will have US specified persons or US reportable accounts. Moreover, registering and filing a nil return on the HMRC website was proving a far from entirely smooth process for practitioners given various software limitations in the process,” George Hodgson, STEP’s deputy chief executive, said.

“HMRC's move on nil returns, which has been agreed with the US, is therefore extremely welcome,” he added.

This publication contacted HMRC about the matter; it may update in due course.