The 2010 Foreign Account Tax Compliance Act (FATCA) requires foreign financial institutions to report detailed information about US account holders to the IRS and possibly withhold taxes on individual accounts.
"We are pleased that the UK, one of our closest allies, is the first jurisdiction to sign a bilateral agreement with us and we look forward to quickly concluding agreements based on this model with other jurisdictions," Mark Mazur, assistant Treasury secretary for tax policy, remarked.
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Enforcing the FATCA agreement is aimed at creating a new global regulatory system to prevent Americans from dodging taxes through foreign accounts, including a plan to obtain US taxpayer information through foreign governments.
Commenting the move, the UK Treasury said that the agreement will improve its ability to obtain information from the US to help address its own tax evasion issues, while benefiting UK financial institutions by addressing their legal concerns.
The US Treasury has said that it will sign similar agreements with other countries in the near future, noting the UK deal is based on a model agreement developed in consultation not just with London but the governments of France, Germany, Italy and Spain.
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