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HMRC internal manual

International Exchange of Information Manual

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Charities: Due diligence: New entity accounts

IEIM404900: Charities: Due diligence: New Entity Accounts

 

The due diligence requirements for new entity accounts are broadly the same as those for new individual accounts, an entity is any account holder that is not an individual and so will include recipients of charitable grants that are companies, trusts, partnerships, foundations or any other entity. It will also include entities that are equity or debt interest holders in the charity.

The charity must determine whether the entity is a Reportable Person, and whether the entity is a passive Non-Financial Entity with one or more Controlling Persons who are Reportable Persons.

To do this a charity must obtain a self-certification [see IEIM404880] and confirm the reasonableness of such self-certification [see IEIM404940]. In practice, this means the charity must not know or have reason to know that the self-certification is incorrect or unreliable - if the self-certification fails the reasonableness test, a new valid self-certification must be obtained. Charities are not, however, expected to carry out an independent legal analysis of relevant tax laws to confirm the reasonableness of a self-certification.

If the self-certification indicates that the entity, or its Controlling Persons (where relevant) are tax resident in a Reportable Jurisdiction the charity must treat the account as a Reportable Account.

 

Exception to the need to obtain a self-certification

There is an exception to the requirement to obtain a self-certification where the Financial Institution can reasonably determine, based on information in its possession or that is publicly available, that the Account Holder is not a Reportable Person. For example where such information shows that the entity is a corporation that is publicly traded, or a Governmental Entity.

For charities making grants to other UK charities the information held in the public registers of the Charities Commission of England and Wales, the Charities Commission of Northern Ireland, and the Office of the Scottish Charity Regulator may be used to determine that the charity is resident for tax purposes in the UK. A charity registered with any of the above bodies is considered to be tax resident in the UK, and any grants paid to it will not be reportable.