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HMRC internal manual

International Exchange of Information Manual

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HM Revenue & Customs
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Miscellaneous: Mergers and Bulk Acquisitions: Merger of Investment Entities

Miscellaneous: Mergers and Bulk Acquisitions: Merger of Investment Entities

Mergers of Investment Entities can be different to mergers of Custodial Institutions or Depository Institutions. The Financial Accounts of Investment Entities are its equity and debt interest, so the merger of two such entities creates a series of new accounts in the surviving entity.

Mergers of Investment Entities will normally involve a surviving fund taking over the assets of the merging fund in exchange for issuing shares or units to the investors of the merging fund. The shares or units in the merging fund are then extinguished. The new shares in the surviving fund will be new accounts except where both funds were previously administered by the same person, for example the fund manager, who reported on behalf of the Investment Entities or the merged fund takes over and holds the information on the reportable status of the debt and equity holders in the merged fund and can, therefore, continue to report on the basis of that information.

FATCA Reporting

There are a number of potential scenarios for FATCA reporting depending upon whether the merging fund (the investors of which will create the New Accounts in the surviving fund) is a UK Financial Institution and whether it is a Reporting or Participating Financial Institution, Deemed Compliant Financial Institution or Non-Participating Financial Institution. These are considered below.

 

1)  More than one fund sponsored by the same UK sponsor

Where both funds are sponsored UK funds with the same UK sponsor, no new accounts are created. This is because for Sponsored Financial Institutions, whether a financial account is a new account or not is determined by reference to whether it is new to the sponsor (for example the fund manager), and not whether it is new to the Sponsored Financial Institution (the fund).

 

2)  Merging fund is a Reporting Financial Institution

Where the merging fund is a Reporting Financial Institution (including a Sponsored Financial Institution, but where the funds do not share the same sponsor), a FATCA Partner Jurisdiction Financial Institution or a Participating Foreign Financial Institution, the surviving fund can rely on the account identification and documentation performed by the merging fund and will not need to undertake any further account due diligence in order to comply with its FATCA obligations. The surviving fund can continue to use the same account classification as the merging fund until there is a change in circumstances for the Financial Account.

 

3)  Merging fund is not a Reporting Financial Institution

Where the merging fund is not a Reporting Financial Institution, a FATCA Partner Jurisdiction Financial Institution or a Participating Foreign Financial Institution (because it is a Deemed Compliant Financial Institution, a Non-Participating UK Financial Institution or a Non-Participating Foreign Financial Institution), the surviving fund will need to undertake account identification procedures on the new accounts. However, in these circumstances the account identification procedures will be limited to those that are required for Pre-existing Accounts and should be carried out at the latest by the 31 December following the date of the merger or 31 December of the year following the year of the merger, if the merger takes place after 30 September of any calendar year.