FATCA, in plain terms

FATCA, the Foreign Account Tax Compliance Act, passed in 2010. It requires financial firms outside the US, UK banks included, to identify customers who are US persons and report their account details to the IRS each year, through HMRC under the UK-US agreement. The aim was to make it hard for Americans to hide money offshore.

What FATCA actually does

For you, FATCA shows up as a form. When you open a UK account the provider asks whether you are a US person and, if so, for your US taxpayer identification number. That is FATCA self-certification. The bank then reports your name, account number and balance to the IRS. It is a trail, not a charge; no money leaves your account because of FATCA itself.

Who counts as a US person

The net is wide. US citizens, including dual nationals and so-called accidental Americans born in the US but raised elsewhere, US green-card holders, and people who meet the US residency day-count test all count. Living in the UK and paying UK tax does not take you out of it; US citizenship is based on status, not where you live.

Where it bites

The cost of FATCA is rarely tax. It is the providers who decline. Running US reporting is an overhead, and a firm with few American customers may decide the compliance is not worth it and turn US persons away. That is why a UK current account opens easily while a smaller investment platform says no: same law, different appetite for the paperwork.

FATCA also is not the same as your US filing duties. Reporting by the bank does not replace the forms you file yourself, the FBAR and Form 8938, which have their own thresholds.