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International Exchange of Information Manual

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Charities: Definitions

IEIM404715: Charities: Definitions

 

The list below of definitions are terms that appear throughout the AEOI regimes.  The explanations below do not replace the definitions found within the Common Reporting Standard and Inter-Governmental Agreements and elsewhere in this guidance, and the list is not exhaustive. They are intended to provide clarification for the charities sector on how some of the more common terms apply to their operations.

 

Financial Institution

See IEIM400610

Investment Entity

See IEIM404720

Financial Asset

Financial Assets are investments such as securities (stocks, shares, bonds, debentures), commodities, swaps, insurance or annuity contracts and interests in partnerships.  They also includes any interests in any of the above. They do not include direct interests in real property or cash.

Financial Account

For Investment Entities, Financial Accounts are the debt and equity interests in that entity. For charities that are trusts this will include settlors and beneficiaries of the trust (but not donors); for charities that are companies this will include shareholders and anyone else with an interest in the profits or capital of the company. See IEIM404750 for trusts, and IEIM404760 for companies.

Account Holder

An Account Holder is the person who holds an account with a Financial Institution.  For a charity that is an Investment Entity, and therefore is itself a Financial Institution, its Account Holders are the persons that hold its debt or equity interests, so for example the trust beneficiary or company shareholder. Trust beneficiaries include anyone who receives a distribution from the trust, whether directly or indirectly, and whether discretionary or mandatory. See IEIM404740.

Entity

Any Financial Institution or Account Holder that is not a natural person This includes companies, partnerships, trusts, foundations, associations and other legal arrangements.

An unincorporated association is an entity, even if all its members are natural persons.

Non-Financial Entity (NFE)

Any Entity that is not a Financial Institution [see IEIM400610].

Active Non-Financial Entity

A Non-Financial Entity with less than 50% of its income from Passive Income sources; a publicly traded NFE, or non-profit NFE.

A non-profit NFE is a not for profit organisation established and operated in its jurisdiction of residence exclusively for religious, charitable, scientific, artistic, cultural, athletic or educational purposes, or as a professional organisation, business league, chamber of commerce, labour organisation, agricultural or horticultural organisation, civic league or an organisation operated for the promotion of social welfare. In all cases the organisation must be exempt from income tax and its income and assets cannot be applied other than for the express purposes for which the organisation is established.

The latter category means that all UK charities that are not financial institutions are Active NFEs irrespective of their income sources.

Passive Non-Financial Entity

Any Non-Financial entity that is not within one of the classes of active NFE. It also includes an Investment Entity within the definition of a Managed Investment Entity [see IEIM400770] that is resident in a Non-Participating Jurisdiction.

Passive Income

Income from investing in assets, rather than from trading or business activities [see IEIM404020]. The receipt of a program-related or social investment in the form of a grant or a loan is not considered to be passive income.

Reportable Account

An account held by an individual or Entity resident for tax purposes in a Reportable Jurisdiction.  For most charitable trusts this will be the grant recipient of the charity. It also includes the Controlling Persons of a Passive Non-Financial Entity who are tax resident in a Reportable Jurisdiction.

Controlling Person

This is relevant for entities that are Passive Non-Financial Entities; it is synonymous with ‘beneficial owner’ and is the natural person(s) who exercise control over an entity. For companies it will include those controlling more than 25% of the company and/or its assets, or if none has such control the Senior Managing Official; for partnerships it is the partners. For trusts and similar legal arrangements it means the settlor(s), trustee(s), protector(s), beneficiary(ies) or class(es) of beneficiary; for trusts all of these natural persons must be treated as Controlling Persons, whether or not any of them actually exercises control over the trust.

Reportable Jurisdiction

A jurisdiction that has adopted the CRS and with which the UK has an agreement to exchange information [see IEIM402340] for a list.

Non-Participating Jurisdiction

Any jurisdiction that has not committed to adopt the CRS.  A list of participating jurisdictions can be found at CRS by jurisdiction - Organisation for Economic Co-operation and Development. A non-participating jurisdiction would be any jurisdiction not appearing on this list.  Participating jurisdictions are not necessarily reportable jurisdictions.  Reportable jurisdictions are those that have both enacted the CRS in domestic legislation and that the UK has agreed to exchange information with.

TIN

Tax Identification Number, or functional equivalent. In the UK this will be either a National Insurance Number or Unique Taxpayer Reference Number, where issued. A list of the TINs issued by different jurisdictions can be found at Tax identification numbers (TINs) - Organisation for Economic Co-operation and Development. [see IEIM402040]