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HMRC internal manual

International Exchange of Information Manual

Charities: Financial Institution

IEIM404720: Charities: Financial Institution

A charity may be a Financial Institution for the purposes of the CDOT and CRS AEOI regimes where it comes within the definition of Investment Entity [see IEIM400770].

If a charity is not a Financial Institution then it will have no reporting obligations. Under FATCA charities are specifically excluded from the definition of Financial Institution.


Managed Investment Entity

A charity will be an Investment Entity where it meets two tests:

  1. its financial assets are managed, in whole or part, by a Financial Institution, and
  2. it meets the financial assets test below.


The charity is managed by a Financial Institution if that Financial Institution performs, either directly or through another service provider, any of the following activities on behalf of the charity:

  1. Trading in money market instruments
  2. Foreign exchange, exchange interest rate and index instruments
  3. Transferrable securities
  4. Commodities futures trading
  5. Individual and collective portfolio management
  6. Otherwise investing, administering or managing Financial Assets or money

To meet this test, the managing Financial Institution must have discretionary authority to manage the charity’s assets in whole or in part. See IEIM404725 for examples.


A charity meets the financial assets test if it gross income is primarily attributable to investing, reinvesting or trading in financial assets. This means that at least 50% of 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 an investment entity is to be determined; or
  • The period in which the entity has been in existence


Both tests above must be met before a charity is an Investment Entity: the management of assets by a Financial Institution and 50% or more of its income from financial assets. If the financial assets are not managed, or they are managed by an individual, then the charity will not be an Investment Entity. When considering whether the management is carried out by an individual or a Financial Institution the charity must look to the asset management arrangement and whether that is with an individual acting in their own capacity, or on behalf of a Financial Institution, for example as an employee or partner in a firm.


Registered charities that do not meet the definition above are Active Non-Financial Entities for the purposes of all the AEOI regimes, regardless of their income sources.


Common Investment Funds

Common Investment Funds are a type of charitable investment entity that function in a similar way to Collective Investment Vehicles (CIVs) but are not regulated in the UK as CIVs.  They will come within the definition of Financial Institution most commonly as Investment Entities in the definition at IEIM400770. This means they are Financial Institutions irrespective of whether their assets are managed by a Financial Institution.


Common Deposit Funds

Common Deposit Funds are charitable funds set up to take deposits from charities providing an investment return to investors into the fund. There may be funds that are considered to be taking deposits and carrying out the activities of a Depository Institution [link IEIM400740]. Most will be Investment Entities as per the definition at IEIM400770.


Trustee Documented Trusts

A charity may also fall within the definition of a Trustee Documented Trust where it meets the definition of a Managed Investment Entity and its trustee is a Reporting Financial Institution. Further information about Trustee Documented Trusts can be found at IEIM400990


Residence of charitable entities

Charities should consider the guidance at IEIM400620 to help decide which jurisdiction a charity is resident in for CRS purposes.