Barclays Offshore Bank Accounts & FATCA – Isle of Mann & Mauritius
Each year, Golding & Golding represents numerous individuals who are either UK citizens, or former UK citizens who are now residing in the US. One of the main issues that comes into play is when a person has a UK Barclay’s account.
Barclays Offshore Bank Accounts
Barclays is one of the major financial institutions throughout the UK, and therefore it is very common for a UK person to have accounts at Barclays. While a majority of the counts are located within the UK, many of our clients have accounts in other nearby areas such as the Isle of Mann or Mauritius.
While there is nothing inherently wrong with having accounts in these offshore locations (especially when the accounts were opened prior to becoming a US person) they tend to receive additional scrutiny from the IRS.
In addition, in recent months Barclays has been issuing more stern FATCA letters via email to clients asking them to update their information and confirm their U.S Status.
If you recently received a FATCA letter or FATCA email, you may be wondering why you received it?
The reason is simple: the foreign financial institution in which you maintain a bank account or other financial account believes that you are a U.S. person.
It is important to note that a US person does not mean a US citizen, or even someone who lives in the United States – the definition is much broader.
Who is a U.S. Person?
A US person (for tax purposes) is classified as any person who is either a United States Citizen, Legal Permanent Resident/Green Card Holder, or U.S. Visa Holder who meets the Substantial Presence Test.
If you are a U.S. person, then the bank is going to report your information to the U.S. Government. It does not matter whether you reside in the United States or in a foreign country, and it does not matter if you are a Dual Citizen and/or Permanent Resident of a foreign country outside of the United States – the institution will still report you.
Consequences for Not Being in FATCA Compliance
There are two factors to consider: what is the foreign bank going to do and what is the IRS going to do.
Foreign Bank Actions
Chances are, the foreign bank will freeze your account and prevent you access to the funds. In more recent months, foreign banks have been going so far as actually closing accounts, suspending funds, and refusing to allow accountholder access to the account until the accountholder has proven compliance with FATCA.
*If you received a FATCA notice from your bank, then you are already on their radar.
IRS/U.S. Government Actions
If the IRS catches you, the penalties can be staggeringly high. Depending on whether you were out of compliance for FATCA, FBAR (Report of Foreign Bank and Financial Accounts), and/or several other forms that may have been required (which depends on the type of accounts and investments you have overseas), the penalties can reach as high as 100%.
In addition, the IRS is authorized to:
- Lien/levy your assets or accounts
- Revoke/deny your passport
- Issue a customs hold
- Impact your ability to renew a Green Card or Visa.
How can the IRS find out about your noncompliance?
– One way a person gets caught is that, in accordance with FATCA, the foreign bank may report your personal information to the IRS. (Once you have received a FATCA letter, you are already in the system.)
– Another way some people get “caught” is when their CPA or bookkeeper gets audited or is in other trouble with the IRS and the Tax Preparer’s files get audited.
– Also, sometimes a simple transfer of a relatively large sum of money between a foreign country and the United States can get you on their radar. For example, the transfer of proceeds from the sale of a foreign property or receipt of an inheritance, etc.
What Can I Do?
The safest and most effective method of getting into compliance is by submitting to one of the IRS offshore voluntary disclosure programs.
Golding & Golding, A PLC
We have successfully represented clients in more than 1000 streamlined and voluntary disclosure submissions nationwide, and in over 70-different countries.
We are the “go-to” firm for other Attorneys, CPAs, Enrolled Agents, Accountants, and Financial Professionals across the globe.