The various UK regulations for automatic exchange of financial account information impose obligations on UK financial institutions.
A UK Financial institution is any financial institution resident in the UK, as well as any branch of a non-resident financial institution located in the UK.
In many cases whether or not a financial institution is a resident in or located in the UK will be clear, but there may be situations where this is less obvious.
In these cases, HMRC will look to determine the entity’s status for the various automatic exchange of information agreements from the tax residence of the entity. If the financial institution is resident for tax purposes in the UK, then HMRC will regard the financial institution as within the scope of the UK Agreement.
For these purposes, resident for tax purposes in the UK means the following:
If an entity is a dual resident, such that it is resident in the UK and also in another country, it will still need to apply the UK legislation in respect of any Reportable Accounts maintained in the UK.
Entity Classification Elections (known as check the box elections), made to the IRS, do not determine the residence of an entity. The tests above must be applied to determine the residence of entities making such elections.
Subsidiaries and branches of UK tax resident financial institutions that are located outside of the UK are not UK financial institutions. However, where such subsidiaries and branches act as introducers of business to a UK financial institution resulting in the financial accounts being held and maintained by the UK financial institution, then the UK financial institution will be required to undertake the appropriate due diligence procedures and report the details of the accounts to HMRC.