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HMRC internal manual

International Exchange of Information Manual

Charities: Income from financial assets

IEIM404730: Charities: Income from Financial Assets

When considering the Financial Assets test in IEIM404720 a charity must review whether its income is primarily from investing in financial assets. In this context financial assets are made up of:

Securities (stocks, shares, bonds, debentures), commodities, swaps, insurance or annuity contracts and interests in partnerships.

It also includes any interests in the above investments.

Financial Assets do not include direct interests in real property or cash.


Trading subsidiaries

Where a charity structure includes a trading subsidiary that pays up profits to a parent entity under the gift aid rules such distributions are treated as a donation from the subsidiary to the parent entity under UK tax rules. For the purpose of determining whether a charity is an investment entity HMRC consider that such income is not income from Financial Assets.


Rental income

Where a charity receives rental income from a property, if that property is held directly by the charity the income will be from a direct interest in real property, and so not from Financial Assets. Where the real property is held via a subsidiary entity, then the situation will be as above for distributions from trading entities.



Interest received on a cash deposit is not income from a Financial Asset.


Whether the income from PRIs is income from Financial Assets will be determined by the legal form of the investment. If the investment takes the form of a loan or a shareholding it will generally be treated as a Financial Asset and any income derived from the investment will be income from Financial Assets.