03.0203 – Not for profit Organisations

Under the Agreements between the UK and the Isle of Man, Guernsey, Jersey and Gibraltar NFFEs established for religious, charitable, scientific, artistic, cultural or educational purposes are not classified as Active NFFEs. These NFFEs may qualify as Active based on their own merits under the criteria at Annex I.VI.B.6 a) to g) of the Agreements between the UK and the Isle of Man, Guernsey, Jersey, and Gibraltar. However, if they are Passive NFFEs then, as for Active NFFEs, the amended terms of the Agreements between the UK and the Isle of Man, Guernsey, Jersey and Gibraltar will still mean that any Controlling Persons will not be reportable.

Amendments to the UK/Crown Dependencies and Gibraltar IGAs Not For Profit Entities

Amendments to the IGAs remove the requirement for Financial Institutions to ‘look through’ charities and other not for profit entities that meet certain criteria. This means that there will be no obligation to determine the identity or the residence of the Controlling Persons.

The UK-US Agreement

Under the UK/US IGA not for profit entities that meet the relevant criteria are defined as Active NFFEs in Annex I.VI.B.4.[i)][j)]. This means that any Reporting Financial Institution that maintains an account for such an entity will not have to ‘look through’ the entity to determine the Controlling Persons.

The UK-CD/Gibraltar Agreement

The position under the UK-CD/Gibraltar IGA is different, as a non-financial not for profit entity may be either ‘Active’ or ‘Passive’. However, the amendments to the IGA have the effect that there will be no need to identify or report on the controlling persons of charities and other not for profit entities that meet the relevant criteria.

This change is effected by amendments to Annex II/III I.H, so that the Controlling Persons are defined as Limited Capacity Exempt Beneficial Owners. This means that in their capacity as Controlling Persons of the NFFE they will be Exempt Beneficial Owners. Once the Financial Institution has established that the NFFE meets the criteria in Annex II/III I.H then they will not have to undertake any further due diligence on the NFFE or its Controlling Persons.

Note: The treatment of Controlling Persons of the NFFE as Limited Capacity Exempt Beneficial Owners means that they are only treated as Exempt Beneficial Owners in respect of their interest in that NFFE. In respect of any other financial accounts that they hold, whether as an individual or as a controlling person in another Passive NFFE, they may still fall to be a Specified Person and their accounts may still be reportable.
Under the International Tax Compliance (Crown Dependencies and Gibraltar) Regulations 2014 it is necessary for the financial institution to specifically establish whether an Entity Account Holder is either

  • a Specified CD or Gibraltar Person,
  • a Passive NFFE with controlling persons who are Specified CD or Gibraltar Persons
  • one of the other categories as defined in the CD and Gibraltar Agreements [please see section 9 for further details].

An NFFE, who meets these criteria, must fall within one of the other categories. Therefore, HMRC will accept a UK Financial Institution treating and documenting a not for profit NFFE as being an Active NFFE in the same way as it would be for the International Tax Compliance (United States of America) Regulations 2014.