United Kingdom

Adoption of International Financial Reporting Standards (IFRS)

IFRS is mandatory for the consolidated financial statements of listed UK companies.

Otherwise, UK companies have a choice of either using full IFRS or UK Generally Accepted Accounting Principles (GAAP) - FRS 102 - for their consolidated and non-consolidated (solus) accounts. UK companies that are subsidiaries also have an option to prepare solus accounts under either IFRS or FRS 102 methodologies with reduced disclosures. There are also additional accounting options available for small companies and micro entities. However, the options available to a company are subject to the requirements of the UK Company Law framework for consistency of GAAP within a group.

Intergovernmental agreements (IGAs) and cooperation

The United Kingdom has a wide range of international agreements, alongside DTTs, for the exchange of information about taxpayers. In addition, the United Kingdom seeks to take a participative role within the OECD with regard to the development of international tax principles.

Implementation of the Foreign Account Tax Compliance Act (FATCA)

The FATCA legislation was enacted by the United States (US) to reduce tax evasion by US citizens and entities. FATCA requires financial institutions outside the United States to identify and report US persons holding financial accounts with them. On 12 September 2012, the United Kingdom and the United States signed an IGA to implement FATCA in the United Kingdom (The UK-US Agreement to Improve International Tax Compliance and to Implement FATCA). The US IGA was brought into force by The International Tax Compliance (United States of America) Regulations (as amended). Since June 2014, UK-based financial institutions must comply with FATCA requirements or may face non-compliance consequences, including penalties and withholding on US-source income.

Implementation of the Common Reporting Standard (CRS)

On 21 July 2014, the OECD released the Standard for Automatic Exchange of Financial Account Information in Tax Matters, including the Commentary on the CRS. The CRS seeks to establish the automatic exchange of tax information as the global standard. The automatic exchange of information involves the systematic and periodic transmission of extensive taxpayer information from the country in which a taxpayer’s financial accounts are located to that taxpayer’s country of residence. On 12 October 2022, the OECD released anticipated amendments to the CRS that widen the scope of potentially reportable financial products as well as the data points for reporting.

The regulations that require UK financial institutions to collect, maintain, and report information for exchange with jurisdictions party to the multilateral competent authority agreement or committed to automatic exchange are The International Tax Compliance Regulations 2015 (as amended), which came into force from 1 January 2016. Similar to FATCA, UK-based financial institutions must comply with the CRS or face non-compliance consequences, including penalties.

UK tax legislation

Announcements of proposed new legislation generally occur at least once a year. The main announcement is made on Budget Day in March when tax rates are set for the coming year. Other announcements can be made at other times and, subject to becoming approved and adopted law, can apply from a specified date. The new legislation is then included in an annual Finance Act, which is expected to be finalised in June or July. In the year of a general election, there may be additional Budget Days and Finance Acts.