FATCA

The UK left the EU on 31 January 2020. A transition period, during which EU laws continue to apply in the UK, is due to end on 31 December 2020. The UK/EU Withdrawal Agreement sets out transitional arrangements and negotiations for the future UK/EU relationship are ongoing.

Mishcon de Reya is acting for a client, Jenny, who has launched a crowdfunding campaign on CrowdJustice seeking to challenge the legislation relating to the Foreign Account Tax Compliance Act ("FATCA") which she believes breaches her fundamental rights to data protection and privacy.

In 2010, following banking scandals involving wealthy Americans hiding money in offshore bank accounts, the US introduced FATCA, requiring foreign banks to report on any US citizen to the IRS, including Americans living in the UK, dual-citizens and US-born British citizens. This law, which operates without exceptions, was extended to the UK in 2012.

Under FATCA, banks are required to send all personal and financial information of any US citizens to US authorities on an annual basis independent of any actual US tax liability. All it takes is for an American citizen to have a bank account outside of America.

Whilst the objective of preventing tax evasion is sound, the claim argues that FATCA is disproportionate and represents a violation of the human rights to privacy and data protection as the transfer of information under FATCA does not require any indication of tax evasion and operates independently of any underlying US tax liability. 

In addition, the claim argues that the sharing of personal and financial information is in direct breach of several GDPR principles (data minimisation, lawfulness of data processing, lack of safeguards for transfers of information to non-EEA countries).

FATCA could expose US citizens to a potential hack throughout the data processing chain as data is passed from the bank to HMRC and then on to the IRS, and there is the significant unintended consequence that US citizens like our client may be unable to open UK bank accounts, or are seeing them closed down, due to the cost implications on banks of compliance with FATCA.

Our client has filed a complaint against the UK tax authorities before the Information Commissioner's Office (ICO), the UK's independent data protection agency. Depending on the outcome of that complaint, a judicial review might be necessary.

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