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HMRC internal manual

International Exchange of Information Manual

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HM Revenue & Customs
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Reportable Information: Non-Participating Financial Institutions

Reportable Information: Non-Participating Financial Institutions

 

Where a Reporting Financial Institution makes payments to Non-Participating Financial Institutions (NPFI) [see IEIM401300], it is required to report the name and the aggregate value of all payments made to each Non-Participating Financial Institution for the years 2015 and 2016.

This obligation was included as a temporary solution to the requirement to withhold on ‘foreign passthru payments’ which is included in the US provisions.  Under the US IGA a UK Financial Institution is not subject to withholding providing that it complies with its due diligence and reporting obligations.

The payments that are to be reported are:

a) US source payments made to an NPFI paid in respect of a financial account in connection with a securities lending transaction, sale-repurchase transaction, forward, future, option, swap, or similar transaction which are directly or indirectly contingent upon or determined by reference to, the payment of interest or a dividend from US sources; and

b) Non-US source interest paid on a financial account held by a NPFI

c) Non-US source dividends paid on a shareholding held in a  financial account held by a NPFI

d)Non-US source payments, to a NPFI, that are the proceeds or benefits of a Cash Value Insurance Contract or Annuity Contract.

Exceptions

The following do not need to be reported:

1) Any payments made that are not in respect of a financial account held by the Financial Institution;

2) Payments for the following:

  • services (including wages and other forms of employee compensation (such as stock options)),
  • the use of property,
  • office and equipment leases,
  • software licenses,
  • transportation,
  • freight,
  • gambling winnings,
  • awards, prizes or scholarships, and
  • interest on outstanding accounts payable arising from the acquisition of goods or services.;

 

3) Payments where the Reporting Financial Institution has only a passive role in the payment process and:

  • has no knowledge of the facts that give rise to the payment, or
  • has no control over the payment, or
  • has no custody of the property which relates to the payment  (e.g. processing a cheque or arranging for the electronic transfer of funds on behalf of one of its customers, or receives payments credited to a customer’s account), or
  • does not have custody of property which relates to the payment.

 

4) Capital markets payments in c) above that are not directly traceable to a US source.

Reporting

A payment will be treated as being made when an amount is paid or credited to an NPFI.

  • Only the aggregate amount of foreign reportable payments made to the payee during the calendar year need to be reported.
  • Where the payments described in c) above, cannot be separately identified as being the equivalent of a U.S. source interest or dividend income then the entire amount of the payment made in relation to that transaction is to be reported.
  • The amount of income to be aggregated is the net amount of the income payment made, there is no requirement to consider amounts withheld, or
  • Alternatively the Financial Institution may report the aggregate number of accounts held by NPFIs and the aggregate amount of reportable payments paid to such accounts.