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HMRC internal manual

International Exchange of Information Manual

Notification requirement: Specified Financial Institutions: Which clients to notify

Notification requirement: Specified Financial Institutions: Which clients to notify

Specified Financial Institutions need to identify ‘specified clients’ who should be notified under either:

  1. The services approach –which targets specific customers
  2. The high-value approach –which identifies a group of customers


The Specified Financial Institution need only perform the due diligence to find specified clients under one of the options.  If, on performing the due diligence, they find that they have no specified clients to notify, they need not then move on to the other approach; they will simply send no notifications.

Tax residence

Specified clients in both cases will be tax resident in the UK in one or both of the tax years 2015-16 or 2016-17.

Tax residence for individuals in the UK applies for the whole of a tax year.  Financial Institutions will establish tax residence at a certain point (either account opening, or as part of due diligence on pre-existing accounts), and will not re-assess that without a change in circumstance or prompt from the account holder (IEIM403200, IEIM403020).  Tax residence therefore refers to the tax residence known to the Specified Financial Institution at that time, which will indicate the tax residence for the whole of the relevant year.

Services approach

Reg.12C(3) and (4)

UK Financial Institutions have existing obligations to identify the tax residence of their account holders and to identify financial accounts that are reportable under the international agreements (IEIM402500).

Financial Institutions should send a notification to any individual account holders who are tax resident in the UK, and either:

  1. The Financial Institution (including through a branch) maintains a financial account for that individual that is in a participating jurisdiction or the US, and that individual is the account holder in their own capacity
  2. The Financial Institution has referred one of their individual account holders to another Financial Institution for them to provide a financial account that is in a participating jurisdiction or the US


In terms of the referral, it is not necessary to know whether the financial account was actually provided; the notification should be sent on the basis of the referral. The Financial Institution the client is referred on to would be a Specified Financial Institution were they operating in the UK.

High-value approach


We recognise that Financial Institutions with a lot of clients may not have a detailed knowledge of their clients’ affairs, and that in these cases the specific, services approach will be very onerous.

By 31 December 2016 all Specified Financial Institutions will have identified their high-value individual account holders –that is those who have financial accounts worth more than US$1 million (IEIM402910, IEIM400510).  These are UK accounts, but individuals with this level of wealth in the UK are more likely to also have financial accounts overseas.

Under the general approach, Specified Financial Institutions must send the notification to all of their high-value individual account holders, who are account holders with that financial institution at 30 September 2016.

Under the various international agreements, the term ‘high value account’ refers to a Preexisting Individual Account with a balance or value that exceeds US$ 1m as of 31 December on the first year of review for the agreement, or at 31 December of any subsequent year (IEIM402910).  So for the purposes of finding customers with high value accounts at 30 September 2016 for this approach to the notification, the Specified Financial Institution may use the list they prepared at 31 December 2015 or 31 December 2016.

Specified Financial Institutions that are trusts

Trusts are entities under the definitions in the Common Reporting Standard, and can meet the definition of a Specified Financial Institutions and be within the obligation to notify. There is detailed guidance on how and when trusts are Financial Institutions [IEIM400800].

For trusts, the ‘financial account’ will be the debt or equity interest in the trust [IEIM401700].  The account holders will include anyone who may receive a distribution, directly or indirectly.  A discretionary beneficiary will only be treated as an account holder in the years in which it receives a distribution from the trust.

In most cases, a trust that is UK resident will, by default, be providing a UK financial account. This means that under the services approach, the Specified Financial Institution will not have any specified clients for whom they maintain an account in a participating jurisdiction or the US.  They will still need to consider whether they have referred any of their account holders to another Financial Institution for the provision of such an account.

The general approach applies as normal.

Other Financial Institutions

Unlike Reporting Financial Institution, the term Financial Institution will cover the whole legal entity, including any branches of the Financial Institution that are outside the UK.  Specified Financial Institution excludes Non-Reportable Financial Institutions, but starts with Financial Institution so will also include branches.

Where an account is maintained (other than for trusts, as noted above) is a question of fact.  In the case of some branches, the account will be maintained where the branch conducts business; for others it will be maintained where the head office company is located and the branch will be referring the client as an introducer.

By the same token as noted above, as non-UK companies are not directly within the scope of the UK legislation, UK branches of non-UK companies will not be covered by the notification rules –even though they may be UK Reporting Financial Institutions for the purposes of due diligence and reporting under the Regulations.  See, however, the guidance on overseas persons at IEIM607000+.


There is separate automatic exchange guidance for charities, many of whom will be trusts.  Specified Financial Institution excludes any Financial Institution meeting the definition in [IEIM404715], which means that charities will be excluded from the obligation.


Where for legal or regulatory reasons a Specified Financial Institution is unable to provide a financial account, but it was able to in the past and as a result of this it still maintains such financial accounts, these are not considered a “financial account” for the purposes of the client notification.


Insurer B UK Limited previously had a German branch providing policies in Germany; those policies could only be provided (for legal or regulatory reasons) to German residents.  

The branch was wound up into the UK company when that business ceased to seek new business.  Insurer B UK Limited still maintains the German policies but does not provide any new ones. 

Although the German branch policies cannot, at the time, have been sold to UK residents, there is a chance that some of them may now belong to someone who has become UK tax resident; but the incidence of this is likely to be very small. 

Insurer B UK Limited is, at 30 September 2016, forbidden for regulatory or legal reasons from providing policies to non-UK residents.  It could not, therefore, now provide the German policies, so does not need to consider them as financial accounts when looking for clients to who are UK tax resident and for whom it maintains an account in a participating jurisdiction or the USA.