We are the voice of insurance and long-term savings | Contact us


New regulations to combat tax evasion and avoidance of individuals mean that Life members have to enquire about their customers’ tax residency.

On 1 September 2013, The International Tax Compliance (United States of America) Regulations 2013 came into force.  These regulations are the result of the new US Foreign Account Tax Compliance Act (FATCA). This requires financial institutions (including life insurance companies) around the world to report details of any US account holder to the Internal Revenue Service (IRS).

The UK Government entered into an agreement with the US to facilitate the transfer of sensitive information, meaning the information needs to be sent to Her Majesty's Revenue and Customs (HMRC), not the IRS directly.

The UK Government has also formally announced its commitment to be part of a multilateral automatic exchange of a wide range of financial information on individuals. 

What is changing?

As a result of the new regulations, Life Companies selling products that have a surrender/cash value or Purchased Life Annuities, will now have to enquire and retain information on the tax residency status of policyholders.

For new policies entered into on or after 1 July 2014, if a policyholder is a US person for tax purposes, the life company will be obliged to report certain information about the policy to HMRC. 

However, the Government is expected to agree similar deals, like that signed with the US, in the near future and more reporting will be required. It is still unclear whether any new agreement will also include reporting for existing policies.

For more information, including the HMRC guidance on how they will apply the law, visit the HMRC website.  

What the ABI is doing

The ABI, alongside the Association of Professional Financial Advisors (APFA), plans to produce:

  • Best practise guidance for Life Companies and Financial Advisers, outlining our suggested approach to the new KYC procedures for new policyholders
  • Policyholder self-certification wording 

Other related issues

A recent ECJ case (RVS Levensverzekeringen NV) relating to Insurance Premium Tax (IPT) also implies that insurers now have to consider a policyholder’s tax residency status.  For more information visit our section on IPT.

Last updated 01/07/2016