02.02 – UK Financial Institutions (UKFIs)

The Agreement applies to UK Financial Institutions. Under the Agreement, 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, including a UK branch of a US Financial Institution.

In many cases whether or not a Financial Institution is 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 under the Agreement 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:

  • For a company
    • if the company is incorporated in the UK or centrally managed and controlled in the UK.
  • For a company not resident in the UK
    • where it is within the charge to corporation tax if, and only if, it carries on trade in the UK through a permanent establishment in the UK.
  • For Trusts
    • if most or all of the trustees are resident in the UK for tax purposes, then the Trust is UK resident. Where some of the trustees, but not all are UK tax resident, then the Trust is also to be treated as UK resident if the settlor is both resident and domiciled in the UK for tax purposes.
  • For partnerships
    • if the control and management of the business of the partnership take place in the UK, or the partnership registers with and submits Partnership Tax Returns to the HMRC.

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, are irrelevant for determining whether an entity is in scope for the Agreement.