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HMRC internal manual

International Exchange of Information Manual

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.

There is no requirement to report the name and aggregate value of payments to Non-Participating Financial Institutions for the year 2017 or subsequent years.

The payments that are to be reported for 2015 and 2016 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.