Investment Entity: Charities
A charity, or other not for profit association, may fall within the definition of an Investment Entity where it is managed by a Financial Institution and more than 50% of its income comes from investing in financial assets.
Managed Investment Entity
An entity will be an Investment Entity if it is managed by a Financial Institution [see IEIM400600] and meets the financial assets test as described below.
An entity is managed by a Financial Institution if that Financial Institution performs, either directly or through another service provider, any of the activities described in IEIM400780 (Activity Based Investment Entity) on behalf of the entity. An entity is not regarded as managed by a Financial Institution if that Financial Institution does not have discretionary authority to manage the entity’s assets either in whole or in part.
An entity may be managed by a mix of other entities and individuals. If one of the entities involved in the management of the entity is a Financial Institution within the meaning of the agreements then the entity meets the requirements for being managed by a Financial Institution.
An entity meets the financial assets test if its gross income is primarily attributable to investing, reinvesting or trading in financial assets. This is a similar test to that in the section above requiring that at least 50% of its income is attributable to investing, reinvesting or trading in financial assets in the shorter of:
- The three year period ending on 31 December in the year preceding that in which its status as in investment entity is to be determined; or
- The period in which the entity has been in existence.
HMRC has published specific guidance for charities with AEOI reporting obligations, please see IEIM404700+
Under the FATCA agreement with the USA all charities are excluded from reporting under the exemption for non-profit organisations [see IEIM401000].