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Checks required on policyholder tax residency

29 January 2016
Alison Carr

Over the last two years, the UK has put in place information exchange agreements including the Foreign Account Tax Compliance Act with the US and agreements with Crown Dependencies. These required the UK to inform the tax authorities in the appropriate countries of certain financial information relating to residents of the other countries. On 1 January 2016, an OECD initiative called the Common Reporting Standard came into force which considerably widened the number of countries involved. These agreements and the associated UK legislation mean that there is now a requirement for insurers to establish the tax residency status of their policyholders and, where necessary, report this information to HMRC.

In December 2015, the ABI and APFA published a document: “Know your customers’ tax residency: a guide for insurers and financial advisers”, which gave advice on this issue, including the following:

Insurers should check whether there are any indications that any existing policyholders are not UK residents and, if there are, ask the policyholder to self-certify their tax residency status.

Insurers are recommended to introduce self-certification of tax residency for all new policyholders via the application form or equivalent process and to check for consistency of this information with other information provided in the application.

Indications that customers are not UK tax residents could include a non-UK passport provided as proof of identity or a non-UK contact address.

We recommend that all insurers read the ABI/APFA document, familiarise themselves with the legislative requirements and set up any appropriate processes to comply with the requirements. You may wish to discuss this with your tax advisors.