INTERVIEW: FATCA Increasing Demand For US Tax Specialists Worldwide

Tom Burroughes

28 August 2012

In what appears to be a growing trend, a veteran UK-based tax expert has set up his own practice aimed directly at the hundreds of thousands of expat Americans who need to get their houses in order financially speaking ahead of sweeping new compliance rules.

David Treitel, who has worked for such accountancy giants as Ernst & Young and KPMG before more recently working at US Tax and Financial Services, an international firm, established his own business, American Tax Returns, in early August. He is based in southwest London.

The US FATCA Act, enacted late in 2010 and due to kick in from 2013 in stages, imposes heavy reporting requirements on what the act designates as Foreign Financial Institutions. Failure to comply means FFIs must pay a 30 per cent withholding tax on income at source. The burden of establishing the identity and investments of potential US clients has deterred a number of the world’s biggest banks, such as HSBC, Singapore's DBS and Germany's Deutsche Bank, from dealing with expat US citizens.

At a time when under a million of the estimated total of 7 million expat US citizens worldwide file annual US tax returns, the scope for getting business from such people is enormous, Treitel told this publication recently in an interview.

“There are a growing number of firms of tax advisors focusing on expat Americans given that the IRS are effectively creating a great marketing effort for US tax specialists worldwide and that FATCA is simply going to increase the demand,” he said.

Filling the gap

While some firms are shunning expat Americans, others see the value of putting an offering on the table, such as the UK-headquartered London & Capital, Switzerland’s Reyl & Cie, and the deVere Group, the global IFA firm.

Treitel said there should be plenty of expertise to fill gaps left if some banks cease their services.

“Many are excellently qualified and have trained with larger accounting firms. There are few licensing requirements to be a tax advisor, so anyone seeking a new advisor should be prepared to make certain that their new firm is fully qualified both in the US and in the country where the advisor is based,” he said.

One of the issues that has arisen is the phenomenon of the so-called "accidental Americans”, or people who don't realize their US ties are not ready for the new rules.

“According to the US Taxpayer Advocate there are approximately seven million Americans overseas, but fewer than one million filing tax returns. There are still millions who need to file with the IRS. This includes people who have never lived in America or left as infants so have no idea that America requires tax returns to be filed,” Treitel continued.

“For example I met a Canadian who has just graduated from university in the UK. She is 26 years old and lived in Canada until she came to university. She carries an American passport because her father was American. He died when she was five, so she has no connections to America at all. Nonetheless she needs to file to report investments her family have given to her in Canada,” he said.

Treitel said most of his clients are referred directly to him by other accountants, financial advisors and lawyers.

“These include individuals who have never filed, some who are going through divorce and need help in organizing tax returns and dividing of assets in a tax efficient manner as well as others who are entirely up to date but simply want a more individual service and the ability to draw on my experience of US-UK tax issues,” he said.

Transparent world

The issues thrown up by FATCA and other US legislation are not, however, solely a concern for expat Americans. A number of other countries are, or might be, looking to broaden the reach of their tax authorities. What does Treitel think about that?

“It seems inevitable that if we are moving over the coming decades to such significant increases in information exchange between governments that anyone keeping money outside of their home country who is not fully tax compliant might start having concerns,” he said.

Treitel certainly hasn’t rushed into setting up on his own. Before starting his firm, Treitel examined more than 50 professional services firms , to see what sort of demand there was for his business.

He is closely watching developments. Since 2007, he has been a member of the private client committee of the tax faculty of ICAEW, as well as being a founder member of the FATCA working party at the same organization.

“We tend to focus on ordinary accounting practices where they may come across one or two American clients. They often find dealing with Americans to be confusing,” he said.

As mentioned already, a considerable problem is knowing just how many US citizens there are living abroad. Depending on definitions , there are between 250,000 and 400,000 Americans living in the UK. This means there are thousands of people who may be more “American” than they may realize, which adds to uncertainties. This also means, for example, that there are people who could be paying money into retail savings schemes when they should not be because annual US tax reporting and potentially high US tax rates could significantly affect investment returns.

The basis of Treitel’s business will be helping such expats file tax returns, in some cases doing so for the first time in their lives. He is likely to be busy.