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Haydon Perryman, CGMA posted: “02.13 – Local Client Base Financial Institutions

02.13 – Local Client Base Financial Institutions

There are ten criteria that must all be met before a Financial Institution can be treated as a Local Client Base Financial Institution. A Financial Institu”

New post on FATCA, IGAs, AEI/CRS, DAC, CDOT & 871(m)

VCT

by Haydon Perryman, CGMA

02.13 – Local Client Base Financial Institutions

02.13 – Local Client Base Financial Institutions

There are ten criteria that must all be met before a Financial Institution can be treated as a Local Client Base Financial Institution. A Financial Institution should self-assess whether it meets these criteria and maintain appropriate records to support its self-assessment. The criteria are listed below:

a) The Financial Institution must be licensed and regulated under the laws of the UK. For example, this would include where a Financial Institution is an Authorised Person under Section 31 FSMA 2000 or where closed ended investment companies qualify as an Investment Trust Company under s1158 of the Corporation Tax Act 2010, or as a Venture Capital Trust under part 6 Income Tax Act 2007.

b) The Financial Institution must have no fixed place of business outside the UK other than where the location outside of the UK houses solely administrative functions and is not publically advertised to customers.

This applies even if the fixed place of business is within a jurisdiction that has entered into an Agreement with the US concerning FATCA.

c) The Financial Institution must not solicit potential Financial Account holders outside the UK. For this purpose, a Financial Institution shall not be considered to have solicited such customers outside the UK merely because it operates a website, provided that the website does not specifically indicate that the Financial Institution provides accounts or services to non-UK residents or otherwise target or solicit US customers.

A Financial Institution will also not be considered to have solicited potential Financial Account holders outside the UK if it advertises in either print media or on a radio or television station and the advertisement is distributed or aired outside the UK, as long as the advertisement does not specifically indicate that the Financial Institution provides services to non-residents. Also, a Financial Institution issuing a prospectus will not, in itself, amount to soliciting Financial Account holders, even when it is available to US Persons in the UK. Likewise, publishing information such as Reports and Accounts to comply with the Listing Rules, Disclosure Rules and Transparency or AIM rules to support a public listing or quotation of shares will not amount to soliciting customers outside the UK.

d) The Financial Institution is

required under the tax laws of the UK to perform information reporting, such as the reporting required under Schedule 23 FA 2011 or the withholding of tax with respect to accounts held by residents of the UK, or is required to identify whether account holders are resident in the UK as part of the AML/KYC procedures. For insurance products the following reporting or taxing regimes will apply to this section:

Chargeable events reporting regime. Income minus Expense Regime (I-E). Basic rate tax deducted from the interest portion of a Purchased Life Annuity. e) At least 98 per cent of the Accounts by value, provided by the Financial Institution must be held by people who reside in the UK or another Member State of the European Union.

The 98 per cent threshold can include the Accounts of US Persons if they are resident within the UK. It applies to both Individual and Entity Accounts.

A Financial Institution will need to assess whether it meets this criterion annually. The measurement can be taken at any point of the preceding calendar year for it to apply to the following year, as long as the measurement date remains the same from year to year.

f) Subject to subparagraph g) below, beginning on 1 July 2014, the Financial Institution does not provide Financial Accounts to:

any Specified US Person, who is not a resident of the UK (including a US Person that was a resident of the UK when the account was opened, but subsequently ceases to be a resident of the UK), a Non-Participating Financial Institution, or any Passive NFFE with Controlling Persons who are US citizens or resident for tax purposes who are not resident in the UK. Where a Local Client Base Financial Institution provides Financial Accounts to US citizens who are resident in the UK, these Financial Accounts do not need to be reported to HMRC unless the account holder subsequently ceases to be a resident of the UK.

g) On or before 1 July 2014, the Financial Institution must implement policies and procedures to establish and monitor whether it provides (meaning opens and maintains) Financial Accounts to the persons described in subparagraph (f) above. If any such Financial Account is discovered, the Financial Institution must either report that account as though the Financial Institution were a Reporting UK Financial Institution, or close the account, or transfer the account to a Participating Foreign Financial Institution, Reporting Model 1 Foreign Financial Institution or a US Financial Institution.

This means that even if Financial Accounts have been provided to Specified US Persons, a Non-Participating Financial Institution or any Passive NFFE with Controlling Persons who are US citizens or residents prior to the 1 July 2014, the Financial Institution can still be a Financial Institution with a Local Client Base provided that the appropriate reporting is carried out.

h) With respect to each Financial Account that is held by an individual who is not a resident of the UK or by an entity, and that is opened prior to the date that the Financial Institution implements the policies and procedures described in subparagraph (g) above, the Financial Institution must review those accounts in accordance with the procedures applicable to Pre-existing Accounts, described in Annex I of the Agreement, to identify any US Reportable Account or Financial Account held by a Non-Participating Financial Institution. Where such accounts are identified, they must be closed, or transferred to a Participating Foreign Financial Institution, Reporting Model 1 Foreign Financial Institution or a US Financial Institution or the Financial Institution must report those accounts as if it were a Reporting UK Financial Institution.

This allows a Financial Institution with a Local Client Base to maintain its status while reporting on relevant Financial Accounts that were opened before the adoption of the requirements set out in this section. This means that where a Local Client Base Financial Institution has a reportable account then it is required to Register and report (or close) the account.

i) Each Related Entity of the Financial Institution, where the Related Entity is itself a Financial Institution must be incorporated or organised in the UK and must also meet the requirements for a Local Client Base Financial Institution with the exception of a retirement plan classified as an Exempt Beneficial Owner.

j) The Financial Institution must not have policies or practices that discriminate against opening or maintaining accounts for individuals who are Specified US Persons and who are residents of the UK.

02.31 – Collective Investment Schemes

Source URL: https://haydonperryman.com/gb/guidance/fatca/02-31/

02.31 – Collective Investment Schemes

References in this Guidance to Collective Investment Scheme, unless otherwise specified, should be read as defined in the UK Regulations. This broadly has the same meaning as it has for the purpose of the Financial Services and Markets Act 2000 , except that it also includes any UK resident company that is:

an Investment Trust for the purposes of the Corporation Taxes Acts (see Section 1158 of the Corporation Tax Act 2010 ), a Venture Capital Trust within the meaning of Part 6 of the Income Tax Act 2007 , For the purposes of the Agreement, Investment Entity includes the following types of entities:

Collective Investment Schemes within the meaning in the Financial Services and Markets Act 2000. closed ended investment companies fund managers investment managers fund administrators transfer agents depositories, and trustees of Unit Trusts. However, the only Financial Accounts that are relevant to the Agreement are the Equity and Debt Interests in Collective Investment Schemes.

The UK Regulations state that where the Investment Entity is a Collective Investment Scheme constituted by a person, only the Collective Investment Scheme will have reporting responsibilities in relation to the Financial Accounts (the Equity and Debt Interests) of that Collective Investment Scheme.

For example, a fund administrator or a trustee of a Unit Trust will not be a Reporting Financial Institution by virtue of acting for a Collective Investment Scheme. (However, by exception, a fund manager may be regarded as a Reporting Financial Institution by virtue of Regulation 3(6) where it acts on behalf of a Collective Investment Scheme that is not constituted by a person, for example, a Unit Trust.)

Therefore any Investment Entity other than:

a Collective Investment Scheme or a manager or operator of a Collective Investment Scheme that is not constituted as a person, will not have any reporting responsibilities in relation to the interests in the Collective Investment Scheme.

Nevertheless, an entity may have reporting responsibilities if it maintains Financial Accounts other than those of the Collective Investment Scheme – see the section on fund distributors below.

02.35 – Identification and reporting on interest in a Collective Investment Scheme

Source URL: https://haydonperryman.com/gb/guidance/fatca/02-35/

02.35 – Identification and reporting on interest in a Collective Investment Scheme

The diagram below illustrates how HMRC believes the account identification and reporting obligations under the Regulations should work for Collective Investment Schemes.

Depending on how the fund is structured, various entities may fall within the definition of Investment Entity. However, as set out at 2.32 above, provided the fund is a Collective Investment Scheme, only the fund has obligations under the Regulations. The fund itself will need to determine which entity carries out the obligations to identify, verify and report on account holders that are Specified US Persons, by reference to its own governance structure and contractual arrangements.

Example 1

Authorised funds in the UK (which are Authorised Unit Trusts, Open-Ended Investment Companies, and Tax-Transparent Funds) are required to have a fund manager that acts as the operator of the fund and is normally assigned responsibility for fulfilling the regulatory obligations of the fund.

Therefore, the fund manager will normally have responsibility for compliance with the obligations about the Financial Accounts of the Fund under the UK legislation. In turn, fund operators typically use third party service providers to provide fund administration, including maintaining records of investors, account balances and transaction services provided by the transfer agent. In these cases, the fund manager might appoint the third party service provider to fulfil account identification and reporting requirements as they will have the necessary records.

The fund’s account identification and reporting obligations apply only to its immediate account holders. It is required to identify all direct individual account holders under the due diligence obligations outlined in this Guidance. Any indirect individual account will be held through a Financial Institution (for example a platform or other nominee), and the fund’s obligation is to identify the direct account holder (such as the Financial Institution) only. In turn, the intermediary Financial Institution will have its own obligation to identify and report on its account holders.

In the diagram, the fund would only need to identify any direct individual account holders (shown on the left-hand side), and the Financial Institutions on the share register. It would be required to report information on any of these that are Specified US Persons.

In turn Custodial Institutions that act as distributors (and not the fund) would be required to identify and report on their direct account holders. The Fund has no obligation to identify and report on accounts held indirectly through other Financial Institutions.

Investment Trust Companies (ITC’s) and Venture Capital Trusts (VCT’s)

ITC’s and VCT’s are classified in the Regulations as Investment Entities.

Although the ITC or VCT will be a Reporting UK Financial Institution, it will not generally need to report on its shares and securities that are regularly traded on an established securities market as these will not be Financial Accounts. Accordingly, in many scenarios it will simply need to file a nil return with HMRC unless it maintains other Financial Accounts. For further guidance on “regularly traded on an established securities market” please see Section 3.10.

To be treated as a VCT or ITC, the entity must be approved by HMRC for the general purpose of either the Venture Capital Trust scheme or, in relation to ITC’s, meet the conditions in section 842 ICTA 1988.

Guidance on the requirements for approval required by HMRC can be found in the following HMRC Manuals · Re VCT’s: http://www.hmrc.gov.uk/manuals/vcmmanual/index.htm

· Re ITC’s: http://www.hmrc.gov.uk/manuals/ctmanual/CTM47110.htm

ITC and VCT shares and securities are invariably listed on the London Stock Exchange and so, subject to the conditions set out in Section 3.10 should meet the requirement of “regularly traded on an established securities market” and will not constitute “Financial Accounts”.

Where an ITC is in a members voluntary liquidation, it will be deemed to meet the regularly traded condition providing no new investments are made.

02.13 – Local Client Base Financial Institutions

02.13 – Local Client Base Financial Institutions

There are ten criteria that must all be met before a Financial Institution can be treated as a Local Client Base Financial Institution. A Financial Institution should self-assess whether it meets these criteria and maintain appropriate records to support its self-assessment. The criteria are listed below:

a) The Financial Institution must be licensed and regulated under the laws of the UK. For example, this would include where a Financial Institution is an Authorised Person under Section 31 FSMA 2000 or where closed ended investment companies qualify as an Investment Trust Company under s1158 of the Corporation Tax Act 2010, or as a Venture Capital Trust under part 6 Income Tax Act 2007.

b) The Financial Institution must have no fixed place of business outside the UK other than where the location outside of the UK houses solely administrative functions and is not publically advertised to customers.

This applies even if the fixed place of business is within a jurisdiction that has entered into an Agreement with the US concerning FATCA.

c) The Financial Institution must not solicit potential Financial Account holders outside the UK. For this purpose, a Financial Institution shall not be considered to have solicited such customers outside the UK merely because it operates a website, provided that the website does not specifically indicate that the Financial Institution provides accounts or services to non-UK residents or otherwise target or solicit US customers.

A Financial Institution will also not be considered to have solicited potential Financial Account holders outside the UK if it advertises in either print media or on a radio or television station and the advertisement is distributed or aired outside the UK, as long as the advertisement does not specifically indicate that the Financial Institution provides services to non-residents. Also, a Financial Institution issuing a prospectus will not, in itself, amount to soliciting Financial Account holders, even when it is available to US Persons in the UK. Likewise, publishing information such as Reports and Accounts to comply with the Listing Rules, Disclosure Rules and Transparency or AIM rules to support a public listing or quotation of shares will not amount to soliciting customers outside the UK.

d) The Financial Institution is

required under the tax laws of the UK to perform information reporting, such as the reporting required under Schedule 23 FA 2011 or the withholding of tax with respect to accounts held by residents of the UK, or is required to identify whether account holders are resident in the UK as part of the AML/KYC procedures.

For insurance products the following reporting or taxing regimes will apply to this section:

Chargeable events reporting regime. Income minus Expense Regime (I-E). Basic rate tax deducted from the interest portion of a Purchased Life Annuity.

e) At least 98 per cent of the Accounts by value, provided by the Financial Institution must be held by people who reside in the UK or another Member State of the European Union.

The 98 per cent threshold can include the Accounts of US Persons if they are resident within the UK. It applies to both Individual and Entity Accounts.

A Financial Institution will need to assess whether it meets this criterion annually. The measurement can be taken at any point of the preceding calendar year for it to apply to the following year, as long as the measurement date remains the same from year to year.

f) Subject to subparagraph g) below, beginning on 1 July 2014, the Financial Institution does not provide Financial Accounts to:

any Specified US Person, who is not a resident of the UK (including a US Person that was a resident of the UK when the account was opened, but subsequently ceases to be a resident of the UK), a Non-Participating Financial Institution, or any Passive NFFE with Controlling Persons who are US citizens or resident for tax purposes who are not resident in the UK.

Where a Local Client Base Financial Institution provides Financial Accounts to US citizens who are resident in the UK, these Financial Accounts do not need to be reported to HMRC unless the account holder subsequently ceases to be a resident of the UK.

g) On or before 1 July 2014, the Financial Institution must implement policies and procedures to establish and monitor whether it provides (meaning opens and maintains) Financial Accounts to the persons described in subparagraph (f) above. If any such Financial Account is discovered, the Financial Institution must either report that account as though the Financial Institution were a Reporting UK Financial Institution, or close the account, or transfer the account to a Participating Foreign Financial Institution, Reporting Model 1 Foreign Financial Institution or a US Financial Institution.

This means that even if Financial Accounts have been provided to Specified US Persons, a Non-Participating Financial Institution or any Passive NFFE with Controlling Persons who are US citizens or residents prior to the 1 July 2014, the Financial Institution can still be a Financial Institution with a Local Client Base provided that the appropriate reporting is carried out.

h) With respect to each Financial Account that is held by an individual who is not a resident of the UK or by an entity, and that is opened prior to the date that the Financial Institution implements the policies and procedures described in subparagraph (g) above, the Financial Institution must review those accounts in accordance with the procedures applicable to Pre-existing Accounts, described in Annex I of the Agreement, to identify any US Reportable Account or Financial Account held by a Non-Participating Financial Institution. Where such accounts are identified, they must be closed, or transferred to a Participating Foreign Financial Institution, Reporting Model 1 Foreign Financial Institution or a US Financial Institution or the Financial Institution must report those accounts as if it were a Reporting UK Financial Institution.

This allows a Financial Institution with a Local Client Base to maintain its status while reporting on relevant Financial Accounts that were opened before the adoption of the requirements set out in this section. This means that where a Local Client Base Financial Institution has a reportable account then it is required to Register and report (or close) the account.

i) Each Related Entity of the Financial Institution, where the Related Entity is itself a Financial Institution must be incorporated or organised in the UK and must also meet the requirements for a Local Client Base Financial Institution with the exception of a retirement plan classified as an Exempt Beneficial Owner.

j) The Financial Institution must not have policies or practices that discriminate against opening or maintaining accounts for individuals who are Specified US Persons and who are residents of the UK.

02.31 – Collective Investment Schemes

Source URL: https://haydonperryman.com/gb/guidance/fatca/02-31/

02.31 – Collective Investment Schemes

References in this Guidance to Collective Investment Scheme, unless otherwise specified, should be read as defined in the UK Regulations. This broadly has the same meaning as it has for the purpose of the Financial Services and Markets Act 2000 , except that it also includes any UK resident company that is:

an Investment Trust for the purposes of the Corporation Taxes Acts (see Section 1158 of the Corporation Tax Act 2010 ), a Venture Capital Trust within the meaning of Part 6 of the Income Tax Act 2007 ,

For the purposes of the Agreement, Investment Entity includes the following types of entities:

Collective Investment Schemes within the meaning in the Financial Services and Markets Act 2000. closed ended investment companies fund managers investment managers fund administrators transfer agents depositories, and trustees of Unit Trusts.

However, the only Financial Accounts that are relevant to the Agreement are the Equity and Debt Interests in Collective Investment Schemes.

The UK Regulations state that where the Investment Entity is a Collective Investment Scheme constituted by a person, only the Collective Investment Scheme will have reporting responsibilities in relation to the Financial Accounts (the Equity and Debt Interests) of that Collective Investment Scheme.

For example, a fund administrator or a trustee of a Unit Trust will not be a Reporting Financial Institution by virtue of acting for a Collective Investment Scheme. (However, by exception, a fund manager may be regarded as a Reporting Financial Institution by virtue of Regulation 3(6) where it acts on behalf of a Collective Investment Scheme that is not constituted by a person, for example, a Unit Trust.)

Therefore any Investment Entity other than:

a Collective Investment Scheme or a manager or operator of a Collective Investment Scheme that is not constituted as a person,

will not have any reporting responsibilities in relation to the interests in the Collective Investment Scheme.

Nevertheless, an entity may have reporting responsibilities if it maintains Financial Accounts other than those of the Collective Investment Scheme – see the section on fund distributors below.

02.35 – Identification and reporting on interest in a Collective Investment Scheme

Source URL: https://haydonperryman.com/gb/guidance/fatca/02-35/

02.35 – Identification and reporting on interest in a Collective Investment Scheme

The diagram below illustrates how HMRC believes the account identification and reporting obligations under the Regulations should work for Collective Investment Schemes.

Depending on how the fund is structured, various entities may fall within the definition of Investment Entity. However, as set out at 2.32 above, provided the fund is a Collective Investment Scheme, only the fund has obligations under the Regulations. The fund itself will need to determine which entity carries out the obligations to identify, verify and report on account holders that are Specified US Persons, by reference to its own governance structure and contractual arrangements.

Example 1

Authorised funds in the UK (which are Authorised Unit Trusts, Open-Ended Investment Companies, and Tax-Transparent Funds) are required to have a fund manager that acts as the operator of the fund and is normally assigned responsibility for fulfilling the regulatory obligations of the fund.

Therefore, the fund manager will normally have responsibility for compliance with the obligations about the Financial Accounts of the Fund under the UK legislation. In turn, fund operators typically use third party service providers to provide fund administration, including maintaining records of investors, account balances and transaction services provided by the transfer agent. In these cases, the fund manager might appoint the third party service provider to fulfil account identification and reporting requirements as they will have the necessary records.

The fund’s account identification and reporting obligations apply only to its immediate account holders. It is required to identify all direct individual account holders under the due diligence obligations outlined in this Guidance. Any indirect individual account will be held through a Financial Institution (for example a platform or other nominee), and the fund’s obligation is to identify the direct account holder (such as the Financial Institution) only. In turn, the intermediary Financial Institution will have its own obligation to identify and report on its account holders.

In the diagram, the fund would only need to identify any direct individual account holders (shown on the left-hand side), and the Financial Institutions on the share register. It would be required to report information on any of these that are Specified US Persons.

In turn Custodial Institutions that act as distributors (and not the fund) would be required to identify and report on their direct account holders. The Fund has no obligation to identify and report on accounts held indirectly through other Financial Institutions.

Investment Trust Companies (ITC’s) and Venture Capital Trusts (VCT’s)

ITC’s and VCT’s are classified in the Regulations as Investment Entities.

Although the ITC or VCT will be a Reporting UK Financial Institution, it will not generally need to report on its shares and securities that are regularly traded on an established securities market as these will not be Financial Accounts. Accordingly, in many scenarios it will simply need to file a nil return with HMRC unless it maintains other Financial Accounts. For further guidance on “regularly traded on an established securities market” please see Section 3.10.

To be treated as a VCT or ITC, the entity must be approved by HMRC for the general purpose of either the Venture Capital Trust scheme or, in relation to ITC’s, meet the conditions in section 842 ICTA 1988.

Guidance on the requirements for approval required by HMRC can be found in the following HMRC Manuals · Re VCT’s: http://www.hmrc.gov.uk/manuals/vcmmanual/index.htm

· Re ITC’s: http://www.hmrc.gov.uk/manuals/ctmanual/CTM47110.htm

ITC and VCT shares and securities are invariably listed on the London Stock Exchange and so, subject to the conditions set out in Section 3.10 should meet the requirement of “regularly traded on an established securities market” and will not constitute “Financial Accounts”.

Where an ITC is in a members voluntary liquidation, it will be deemed to meet the regularly traded condition providing no new investments are made.

https://haydonperryman.com/gb/guidance/fatca/02-13/

Haydon Perryman, CGMA | February 12, 2016 at 12:52 am | Tags: $UK IGA Guidance , 98% , Collective Investment Scheme , GATCA Teaching Notes , Investment Trust , Local Client Base FI , Rule Map , VCT

| Categories: GATCA

| URL: http://wp.me/s4BlQ5-vct

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Haydon Perryman, CGMA posted: "02.13 – Local Client Base Financial Institutions

02.13 – Local Client Base Financial Institutions

There are ten criteria that must all be met before a Financial Institution can be treated as a Local Client Base Financial Institution. A Financial Institu"

New post on FATCA, IGAs, AEI/CRS, DAC, CDOT & 871(m)

VCT

by Haydon Perryman, CGMA

02.13 – Local Client Base Financial Institutions

02.13 – Local Client Base Financial Institutions

There are ten criteria that must all be met before a Financial Institution can be treated as a Local Client Base Financial Institution. A Financial Institution should self-assess whether it meets these criteria and maintain appropriate records to support its self-assessment. The criteria are listed below:

a) The Financial Institution must be licensed and regulated under the laws of the UK. For example, this would include where a Financial Institution is an Authorised Person under Section 31 FSMA 2000 or where closed ended investment companies qualify as an Investment Trust Company under s1158 of the Corporation Tax Act 2010, or as a Venture Capital Trust under part 6 Income Tax Act 2007.

b) The Financial Institution must have no fixed place of business outside the UK other than where the location outside of the UK houses solely administrative functions and is not publically advertised to customers.

This applies even if the fixed place of business is within a jurisdiction that has entered into an Agreement with the US concerning FATCA.

c) The Financial Institution must not solicit potential Financial Account holders outside the UK. For this purpose, a Financial Institution shall not be considered to have solicited such customers outside the UK merely because it operates a website, provided that the website does not specifically indicate that the Financial Institution provides accounts or services to non-UK residents or otherwise target or solicit US customers.

A Financial Institution will also not be considered to have solicited potential Financial Account holders outside the UK if it advertises in either print media or on a radio or television station and the advertisement is distributed or aired outside the UK, as long as the advertisement does not specifically indicate that the Financial Institution provides services to non-residents. Also, a Financial Institution issuing a prospectus will not, in itself, amount to soliciting Financial Account holders, even when it is available to US Persons in the UK. Likewise, publishing information such as Reports and Accounts to comply with the Listing Rules, Disclosure Rules and Transparency or AIM rules to support a public listing or quotation of shares will not amount to soliciting customers outside the UK.

d) The Financial Institution is

required under the tax laws of the UK to perform information reporting, such as the reporting required under Schedule 23 FA 2011 or the withholding of tax with respect to accounts held by residents of the UK, or is required to identify whether account holders are resident in the UK as part of the AML/KYC procedures. For insurance products the following reporting or taxing regimes will apply to this section:

Chargeable events reporting regime. Income minus Expense Regime (I-E). Basic rate tax deducted from the interest portion of a Purchased Life Annuity. e) At least 98 per cent of the Accounts by value, provided by the Financial Institution must be held by people who reside in the UK or another Member State of the European Union.

The 98 per cent threshold can include the Accounts of US Persons if they are resident within the UK. It applies to both Individual and Entity Accounts.

A Financial Institution will need to assess whether it meets this criterion annually. The measurement can be taken at any point of the preceding calendar year for it to apply to the following year, as long as the measurement date remains the same from year to year.

f) Subject to subparagraph g) below, beginning on 1 July 2014, the Financial Institution does not provide Financial Accounts to:

any Specified US Person, who is not a resident of the UK (including a US Person that was a resident of the UK when the account was opened, but subsequently ceases to be a resident of the UK), a Non-Participating Financial Institution, or any Passive NFFE with Controlling Persons who are US citizens or resident for tax purposes who are not resident in the UK. Where a Local Client Base Financial Institution provides Financial Accounts to US citizens who are resident in the UK, these Financial Accounts do not need to be reported to HMRC unless the account holder subsequently ceases to be a resident of the UK.

g) On or before 1 July 2014, the Financial Institution must implement policies and procedures to establish and monitor whether it provides (meaning opens and maintains) Financial Accounts to the persons described in subparagraph (f) above. If any such Financial Account is discovered, the Financial Institution must either report that account as though the Financial Institution were a Reporting UK Financial Institution, or close the account, or transfer the account to a Participating Foreign Financial Institution, Reporting Model 1 Foreign Financial Institution or a US Financial Institution.

This means that even if Financial Accounts have been provided to Specified US Persons, a Non-Participating Financial Institution or any Passive NFFE with Controlling Persons who are US citizens or residents prior to the 1 July 2014, the Financial Institution can still be a Financial Institution with a Local Client Base provided that the appropriate reporting is carried out.

h) With respect to each Financial Account that is held by an individual who is not a resident of the UK or by an entity, and that is opened prior to the date that the Financial Institution implements the policies and procedures described in subparagraph (g) above, the Financial Institution must review those accounts in accordance with the procedures applicable to Pre-existing Accounts, described in Annex I of the Agreement, to identify any US Reportable Account or Financial Account held by a Non-Participating Financial Institution. Where such accounts are identified, they must be closed, or transferred to a Participating Foreign Financial Institution, Reporting Model 1 Foreign Financial Institution or a US Financial Institution or the Financial Institution must report those accounts as if it were a Reporting UK Financial Institution.

This allows a Financial Institution with a Local Client Base to maintain its status while reporting on relevant Financial Accounts that were opened before the adoption of the requirements set out in this section. This means that where a Local Client Base Financial Institution has a reportable account then it is required to Register and report (or close) the account.

i) Each Related Entity of the Financial Institution, where the Related Entity is itself a Financial Institution must be incorporated or organised in the UK and must also meet the requirements for a Local Client Base Financial Institution with the exception of a retirement plan classified as an Exempt Beneficial Owner.

j) The Financial Institution must not have policies or practices that discriminate against opening or maintaining accounts for individuals who are Specified US Persons and who are residents of the UK.

02.31 – Collective Investment Schemes

Source URL: https://haydonperryman.com/gb/guidance/fatca/02-31/

02.31 – Collective Investment Schemes

References in this Guidance to Collective Investment Scheme, unless otherwise specified, should be read as defined in the UK Regulations. This broadly has the same meaning as it has for the purpose of the Financial Services and Markets Act 2000 , except that it also includes any UK resident company that is:

an Investment Trust for the purposes of the Corporation Taxes Acts (see Section 1158 of the Corporation Tax Act 2010 ), a Venture Capital Trust within the meaning of Part 6 of the Income Tax Act 2007 , For the purposes of the Agreement, Investment Entity includes the following types of entities:

Collective Investment Schemes within the meaning in the Financial Services and Markets Act 2000. closed ended investment companies fund managers investment managers fund administrators transfer agents depositories, and trustees of Unit Trusts. However, the only Financial Accounts that are relevant to the Agreement are the Equity and Debt Interests in Collective Investment Schemes.

The UK Regulations state that where the Investment Entity is a Collective Investment Scheme constituted by a person, only the Collective Investment Scheme will have reporting responsibilities in relation to the Financial Accounts (the Equity and Debt Interests) of that Collective Investment Scheme.

For example, a fund administrator or a trustee of a Unit Trust will not be a Reporting Financial Institution by virtue of acting for a Collective Investment Scheme. (However, by exception, a fund manager may be regarded as a Reporting Financial Institution by virtue of Regulation 3(6) where it acts on behalf of a Collective Investment Scheme that is not constituted by a person, for example, a Unit Trust.)

Therefore any Investment Entity other than:

a Collective Investment Scheme or a manager or operator of a Collective Investment Scheme that is not constituted as a person, will not have any reporting responsibilities in relation to the interests in the Collective Investment Scheme.

Nevertheless, an entity may have reporting responsibilities if it maintains Financial Accounts other than those of the Collective Investment Scheme – see the section on fund distributors below.

02.35 – Identification and reporting on interest in a Collective Investment Scheme

Source URL: https://haydonperryman.com/gb/guidance/fatca/02-35/

02.35 – Identification and reporting on interest in a Collective Investment Scheme

The diagram below illustrates how HMRC believes the account identification and reporting obligations under the Regulations should work for Collective Investment Schemes.

Depending on how the fund is structured, various entities may fall within the definition of Investment Entity. However, as set out at 2.32 above, provided the fund is a Collective Investment Scheme, only the fund has obligations under the Regulations. The fund itself will need to determine which entity carries out the obligations to identify, verify and report on account holders that are Specified US Persons, by reference to its own governance structure and contractual arrangements.

Example 1

Authorised funds in the UK (which are Authorised Unit Trusts, Open-Ended Investment Companies, and Tax-Transparent Funds) are required to have a fund manager that acts as the operator of the fund and is normally assigned responsibility for fulfilling the regulatory obligations of the fund.

Therefore, the fund manager will normally have responsibility for compliance with the obligations about the Financial Accounts of the Fund under the UK legislation. In turn, fund operators typically use third party service providers to provide fund administration, including maintaining records of investors, account balances and transaction services provided by the transfer agent. In these cases, the fund manager might appoint the third party service provider to fulfil account identification and reporting requirements as they will have the necessary records.

The fund’s account identification and reporting obligations apply only to its immediate account holders. It is required to identify all direct individual account holders under the due diligence obligations outlined in this Guidance. Any indirect individual account will be held through a Financial Institution (for example a platform or other nominee), and the fund’s obligation is to identify the direct account holder (such as the Financial Institution) only. In turn, the intermediary Financial Institution will have its own obligation to identify and report on its account holders.

In the diagram, the fund would only need to identify any direct individual account holders (shown on the left-hand side), and the Financial Institutions on the share register. It would be required to report information on any of these that are Specified US Persons.

In turn Custodial Institutions that act as distributors (and not the fund) would be required to identify and report on their direct account holders. The Fund has no obligation to identify and report on accounts held indirectly through other Financial Institutions.

Investment Trust Companies (ITC’s) and Venture Capital Trusts (VCT’s)

ITC’s and VCT’s are classified in the Regulations as Investment Entities.

Although the ITC or VCT will be a Reporting UK Financial Institution, it will not generally need to report on its shares and securities that are regularly traded on an established securities market as these will not be Financial Accounts. Accordingly, in many scenarios it will simply need to file a nil return with HMRC unless it maintains other Financial Accounts. For further guidance on “regularly traded on an established securities market” please see Section 3.10.

To be treated as a VCT or ITC, the entity must be approved by HMRC for the general purpose of either the Venture Capital Trust scheme or, in relation to ITC’s, meet the conditions in section 842 ICTA 1988.

Guidance on the requirements for approval required by HMRC can be found in the following HMRC Manuals · Re VCT’s: http://www.hmrc.gov.uk/manuals/vcmmanual/index.htm

· Re ITC’s: http://www.hmrc.gov.uk/manuals/ctmanual/CTM47110.htm

ITC and VCT shares and securities are invariably listed on the London Stock Exchange and so, subject to the conditions set out in Section 3.10 should meet the requirement of “regularly traded on an established securities market” and will not constitute “Financial Accounts”.

Where an ITC is in a members voluntary liquidation, it will be deemed to meet the regularly traded condition providing no new investments are made.

02.13 – Local Client Base Financial Institutions

02.13 – Local Client Base Financial Institutions

There are ten criteria that must all be met before a Financial Institution can be treated as a Local Client Base Financial Institution. A Financial Institution should self-assess whether it meets these criteria and maintain appropriate records to support its self-assessment. The criteria are listed below:

a) The Financial Institution must be licensed and regulated under the laws of the UK. For example, this would include where a Financial Institution is an Authorised Person under Section 31 FSMA 2000 or where closed ended investment companies qualify as an Investment Trust Company under s1158 of the Corporation Tax Act 2010, or as a Venture Capital Trust under part 6 Income Tax Act 2007.

b) The Financial Institution must have no fixed place of business outside the UK other than where the location outside of the UK houses solely administrative functions and is not publically advertised to customers.

This applies even if the fixed place of business is within a jurisdiction that has entered into an Agreement with the US concerning FATCA.

c) The Financial Institution must not solicit potential Financial Account holders outside the UK. For this purpose, a Financial Institution shall not be considered to have solicited such customers outside the UK merely because it operates a website, provided that the website does not specifically indicate that the Financial Institution provides accounts or services to non-UK residents or otherwise target or solicit US customers.

A Financial Institution will also not be considered to have solicited potential Financial Account holders outside the UK if it advertises in either print media or on a radio or television station and the advertisement is distributed or aired outside the UK, as long as the advertisement does not specifically indicate that the Financial Institution provides services to non-residents. Also, a Financial Institution issuing a prospectus will not, in itself, amount to soliciting Financial Account holders, even when it is available to US Persons in the UK. Likewise, publishing information such as Reports and Accounts to comply with the Listing Rules, Disclosure Rules and Transparency or AIM rules to support a public listing or quotation of shares will not amount to soliciting customers outside the UK.

d) The Financial Institution is

  • required under the tax laws of the UK to perform information reporting, such as the reporting required under Schedule 23 FA 2011 or the withholding of tax with respect to accounts held by residents of the UK, or
  • is required to identify whether account holders are resident in the UK as part of the AML/KYC procedures.

For insurance products the following reporting or taxing regimes will apply to this section:

  • Chargeable events reporting regime.
  • Income minus Expense Regime (I-E).
  • Basic rate tax deducted from the interest portion of a Purchased Life Annuity.

e) At least 98 per cent of the Accounts by value, provided by the Financial Institution must be held by people who reside in the UK or another Member State of the European Union.

The 98 per cent threshold can include the Accounts of US Persons if they are resident within the UK. It applies to both Individual and Entity Accounts.

A Financial Institution will need to assess whether it meets this criterion annually. The measurement can be taken at any point of the preceding calendar year for it to apply to the following year, as long as the measurement date remains the same from year to year.

f) Subject to subparagraph g) below, beginning on 1 July 2014, the Financial Institution does not provide Financial Accounts to:

  • any Specified US Person, who is not a resident of the UK (including a US Person that was a resident of the UK when the account was opened, but subsequently ceases to be a resident of the UK),
  • a Non-Participating Financial Institution, or
  • any Passive NFFE with Controlling Persons who are US citizens or resident for tax purposes who are not resident in the UK.

Where a Local Client Base Financial Institution provides Financial Accounts to US citizens who are resident in the UK, these Financial Accounts do not need to be reported to HMRC unless the account holder subsequently ceases to be a resident of the UK.

g) On or before 1 July 2014, the Financial Institution must implement policies and procedures to establish and monitor whether it provides (meaning opens and maintains) Financial Accounts to the persons described in subparagraph (f) above. If any such Financial Account is discovered, the Financial Institution must either report that account as though the Financial Institution were a Reporting UK Financial Institution, or close the account, or transfer the account to a Participating Foreign Financial Institution, Reporting Model 1 Foreign Financial Institution or a US Financial Institution.

This means that even if Financial Accounts have been provided to Specified US Persons, a Non-Participating Financial Institution or any Passive NFFE with Controlling Persons who are US citizens or residents prior to the 1 July 2014, the Financial Institution can still be a Financial Institution with a Local Client Base provided that the appropriate reporting is carried out.

h) With respect to each Financial Account that is held by an individual who is not a resident of the UK or by an entity, and that is opened prior to the date that the Financial Institution implements the policies and procedures described in subparagraph (g) above, the Financial Institution must review those accounts in accordance with the procedures applicable to Pre-existing Accounts, described in Annex I of the Agreement, to identify any US Reportable Account or Financial Account held by a Non-Participating Financial Institution. Where such accounts are identified, they must be closed, or transferred to a Participating Foreign Financial Institution, Reporting Model 1 Foreign Financial Institution or a US Financial Institution or the Financial Institution must report those accounts as if it were a Reporting UK Financial Institution.

This allows a Financial Institution with a Local Client Base to maintain its status while reporting on relevant Financial Accounts that were opened before the adoption of the requirements set out in this section. This means that where a Local Client Base Financial Institution has a reportable account then it is required to Register and report (or close) the account.

i) Each Related Entity of the Financial Institution, where the Related Entity is itself a Financial Institution must be incorporated or organised in the UK and must also meet the requirements for a Local Client Base Financial Institution with the exception of a retirement plan classified as an Exempt Beneficial Owner.

j) The Financial Institution must not have policies or practices that discriminate against opening or maintaining accounts for individuals who are Specified US Persons and who are residents of the UK.

02.31 – Collective Investment Schemes

Source URL: https://haydonperryman.com/gb/guidance/fatca/02-31/

02.31 – Collective Investment Schemes

References in this Guidance to Collective Investment Scheme, unless otherwise specified, should be read as defined in the UK Regulations. This broadly has the same meaning as it has for the purpose of the Financial Services and Markets Act 2000, except that it also includes any UK resident company that is:

For the purposes of the Agreement, Investment Entity includes the following types of entities:

  • Collective Investment Schemes within the meaning in the Financial Services and Markets Act 2000.
  • closed ended investment companies
  • fund managers
  • investment managers
  • fund administrators
  • transfer agents
  • depositories, and
  • trustees of Unit Trusts.

However, the only Financial Accounts that are relevant to the Agreement are the Equity and Debt Interests in Collective Investment Schemes.

The UK Regulations state that where the Investment Entity is a Collective Investment Scheme constituted by a person, only the Collective Investment Scheme will have reporting responsibilities in relation to the Financial Accounts (the Equity and Debt Interests) of that Collective Investment Scheme.

For example, a fund administrator or a trustee of a Unit Trust will not be a Reporting Financial Institution by virtue of acting for a Collective Investment Scheme. (However, by exception, a fund manager may be regarded as a Reporting Financial Institution by virtue of Regulation 3(6) where it acts on behalf of a Collective Investment Scheme that is not constituted by a person, for example, a Unit Trust.)

Therefore any Investment Entity other than:

  • a Collective Investment Scheme
  • or a manager or operator of a Collective Investment Scheme that is not constituted as a person,

will not have any reporting responsibilities in relation to the interests in the Collective Investment Scheme.

Nevertheless, an entity may have reporting responsibilities if it maintains Financial Accounts other than those of the Collective Investment Scheme – see the section on fund distributors below.

02.35 – Identification and reporting on interest in a Collective Investment Scheme

Source URL: https://haydonperryman.com/gb/guidance/fatca/02-35/

02.35 – Identification and reporting on interest in a Collective Investment Scheme

The diagram below illustrates how HMRC believes the account identification and reporting obligations under the Regulations should work for Collective Investment Schemes.

Depending on how the fund is structured, various entities may fall within the definition of Investment Entity. However, as set out at 2.32 above, provided the fund is a Collective Investment Scheme, only the fund has obligations under the Regulations. The fund itself will need to determine which entity carries out the obligations to identify, verify and report on account holders that are Specified US Persons, by reference to its own governance structure and contractual arrangements.

Example 1

Authorised funds in the UK (which are Authorised Unit Trusts, Open-Ended Investment Companies, and Tax-Transparent Funds) are required to have a fund manager that acts as the operator of the fund and is normally assigned responsibility for fulfilling the regulatory obligations of the fund.

Therefore, the fund manager will normally have responsibility for compliance with the obligations about the Financial Accounts of the Fund under the UK legislation. In turn, fund operators typically use third party service providers to provide fund administration, including maintaining records of investors, account balances and transaction services provided by the transfer agent. In these cases, the fund manager might appoint the third party service provider to fulfil account identification and reporting requirements as they will have the necessary records.

The fund’s account identification and reporting obligations apply only to its immediate account holders. It is required to identify all direct individual account holders under the due diligence obligations outlined in this Guidance. Any indirect individual account will be held through a Financial Institution (for example a platform or other nominee), and the fund’s obligation is to identify the direct account holder (such as the Financial Institution) only. In turn, the intermediary Financial Institution will have its own obligation to identify and report on its account holders.

In the diagram, the fund would only need to identify any direct individual account holders (shown on the left-hand side), and the Financial Institutions on the share register. It would be required to report information on any of these that are Specified US Persons.

In turn Custodial Institutions that act as distributors (and not the fund) would be required to identify and report on their direct account holders. The Fund has no obligation to identify and report on accounts held indirectly through other Financial Institutions.

Investment Trust Companies (ITC’s) and Venture Capital Trusts (VCT’s)

 ITC’s and VCT’s are classified in the Regulations as Investment Entities.

Although the ITC or VCT will be a Reporting UK Financial Institution, it will not generally need to report on its shares and securities that are regularly traded on an established securities market as these will not be Financial Accounts. Accordingly, in many scenarios it will simply need to file a nil return with HMRC unless it maintains other Financial Accounts. For further guidance on “regularly traded on an established securities market” please see Section 3.10.

To be treated as a VCT or ITC, the entity must be approved by HMRC for the general purpose of either the Venture Capital Trust scheme or, in relation to ITC’s, meet the conditions in section 842 ICTA 1988.

Guidance on the requirements for approval required by HMRC can be found in the following HMRC Manuals
· Re VCT’s: http://www.hmrc.gov.uk/manuals/vcmmanual/index.htm

· Re ITC’s: http://www.hmrc.gov.uk/manuals/ctmanual/CTM47110.htm

ITC and VCT shares and securities are invariably listed on the London Stock Exchange and so, subject to the conditions set out in Section 3.10 should meet the requirement of “regularly traded on an established securities market” and will not constitute “Financial Accounts”.

Where an ITC is in a members voluntary liquidation, it will be deemed to meet the regularly traded condition providing no new investments are made.

https://haydonperryman.com/gb/guidance/fatca/02-13/

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