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HMRC internal manual

International Exchange of Information Manual

HM Revenue & Customs
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Financial Institutions: Holding Companies and Treasury Centres

Holding Companies and Treasury Centres

Regulation 1.1471-5(e)(1)(v) of the US Treasury Regulations has as a final category of Financial Institution “an entity that is a holding company or a treasury company”, but that definition of “Financial Institution” does not determine the meaning of “Foreign Financial Institution” (FFI) where there is a relevant agreement such as that between the UK and US to implement FATCA.  Removing these categories of UK Financial Institution from the UK Regulations aligns the UK position for FATCA with that of most other countries as well as the Crown Dependencies and Oversea Territories agreements and DAC/CRS.   It also clarifies the position of holding companies and finance companies for non-financial groups (groups with no other Financial Institutions), and reduces compliance burdens for some businesses.

However, because the previous definition of a UK Financial Institution included relevant holding companies and treasury companies some holding company members of financial groups would have registered with the IRS as the Lead Financial Institution of an Expanded Affiliated Group (EAG) for FATCA purposes.

HMRC understands that reversing the registration and re-registering an entire group with new GIINs would be onerous, and an additional and unnecessary administrative burden for such groups.  Furthermore for some groups identifying a new Lead Financial Institution would be difficult and could cause difficulties with counter-parties.

If an entity registered as a Lead Financial Institution also comes within the definition of a UK Financial Institution under one of the remaining four categories then they will continue to be defined and treated as a UK Financial Institution – this may be the case, for example, for treasury companies where they also come within the definition of an investment entity.  Where that is not the case, HMRC are content for an entity that has already registered as a Lead Financial Institution to choose to use the extended definition of financial institution included in the US Treasury Regulations (which as noted above includes the concept of “relevant holding companies” and “treasury centres of financial groups”), should they wish to do so.  For FATCA, where an alternative element of the US Regulations or an alternative element of a different intergovernmental agreement is identified that an entity considers is beneficial then HMRC will consider the matter.  In the circumstances described, a holding company or finance company of a financial group that does not come within the one of the remaining four types of UK Financial Institution will not have any UK Reportable Accounts and will therefore have no UK obligations, and treating itself as an Financial Institution for the purposes of registration with the IRS does not frustrate the intentions of FATCA or AEOI generally.  HMRC is therefore content for entities to take that approach if they wish.

Entities should determine whether they are a financial group by reference to the FATF definition:

“Financial group means a group that consists of a parent company or of any other type of legal person exercising control and coordinating functions over the rest of the group for the application of group supervision under the Core Principles, together with branches and/or subsidiaries that are subject to AML/CFT policies and procedures at the group level”.