102505 – Due Diligence: General Requirements: Requirement to Notify Account Holders

In accordance with regulation 10 of the 2015 Regulations there is a requirement for reporting financial institutions to notify each individual Reportable Person or individual specified U.S. person that information relating to that person that is required to be reported under regulation 6 will be reported to HMRC and may be transferred to the government of another territory in accordance with a relevant agreement. The notification must be made by 31st January in the calendar year following the first year in which the account held by the individual is a Reportable Account maintained by the reporting financial institution (for example – if an account is first identified as a Reportable Account for the 2019 calendar year then the customer must be notified by 31 January 2020). This requirement is intended to provide good time for the notification to be provided to customers ahead of their data being sent to HMRC (in principle, a financial institution may send its report for the preceding calendar year to HMRC at any time after 1 January but in practice and based on FATCA reporting very few report substantially earlier than 31 May).

The notification may be made either in direct communication to the Account Holder, such as a monthly or annual account statement, or by way of general communications such as updates to terms and conditions, and, in either case, may be made electronically or by paper communication. It may also be included in the self-certification or account opening documentation. Note that this a ‘one-off’ requirement and there is no requirement to repeat the process once completed for a particular account.

Separately to the process described above, a Finance Bill 2015 clause provides powers for HMRC to require financial intermediaries (which includes financial institutions) and tax advisers to write to customers to tell them about the automatic exchange of information, disclosure opportunities and penalties for failing to declare liabilities relating to offshore financial accounts. HMRC will be consulting on the clause before the expected introduction of regulations in early 2016; the proposals are intended to be targeted at specific customer groups, rather than being a general requirement to notify all customers as described above.