FATCA, in plain terms

FATCA, the Foreign Account Tax Compliance Act, passed in 2010. It requires financial firms outside the US, UK banks included, to identify customers who are US persons and report their account details to the IRS each year, through HMRC under the UK-US agreement. The aim was to make it hard for Americans to hide money offshore.

What FATCA actually does

For you, FATCA shows up as a form. When you open a UK account the provider asks whether you are a US person and, if so, for your US taxpayer identification number. That is FATCA self-certification. The bank then reports your name, account number and balance to the IRS. It is a trail, not a charge; no money leaves your account because of FATCA itself.

Banks comply because of what the US does to one that does not. FATCA has payers withhold 30% of US-source payments made to a foreign financial institution that stays outside the regime, as the IRS's own summary of its key provisions sets out. Under Article 4 of the UK-US agreement, a UK institution that identifies its US accounts and reports them to HMRC each year is treated as complying and is not subject to that withholding. The cost of not reporting falls on the bank, never on your account.

Who counts as a US person

The net is wide. US citizens, including dual nationals and so-called accidental Americans born in the US but raised elsewhere, US green-card holders, and people who meet the US residency day-count test all count. Living in the UK and paying UK tax does not take you out of it; US citizenship is based on status, not where you live.

Where it bites

The cost of FATCA is rarely tax. It is the providers who decline. Running US reporting is an overhead, and a firm with few American customers may decide the compliance is not worth it and turn US persons away. Some say so in as many words: Moneyfarm names the reporting requirements as its reason for not accepting further US persons, and Bestinvest explains that its custodian does not comply with IRS reporting for US individuals.

The appetite varies enormously by product, and the numbers on this site show the shape of it. Every UK current account checked here will open for a US citizen. Of the investment platforms that sell a stocks and shares ISA, fewer than half will. Same law and the same country, but a very different willingness to carry the paperwork.

The exception worth knowing

FATCA applies to financial accounts, and a debt is not one. A mortgage or a credit card is money you owe rather than money a bank holds for you, so no reporting duty attaches to it and lenders have no FATCA reason to care about your passport. That distinction is why those two corners of the market behave completely differently: across the lenders and card issuers checked here, not one refuses a US citizen for being American. What stops people there is immigration status, time in the country and UK credit history.

FATCA also is not the same as your US filing duties. Reporting by the bank does not replace the forms you file yourself, the FBAR and Form 8938, which have their own thresholds.