The International Tax Compliance (United States of America) Regulations 2014

Meaning of “investment entity”

5.—(1) For the purposes of these Regulations a person (person A) carries on business in the United Kingdom as an investment entity if—

(a) person A undertakes any of the activities referred to in sub-paragraph 1(j)(1) to (3) of Article 1 of the treaty in the course of carrying on business in the United Kingdom, and A’s gross income from that business for the applicable period wholly or mainly derives from those activities, or

(b) on behalf of person A, a financial institution (person B) undertakes any of the activities referred to in sub-paragraph 1(j)(1) to (3) of Article 1 of the treaty in the course of carrying on business in the United Kingdom, and person A’s gross income from the activities undertaken on behalf of person A by person B for the applicable period wholly or mainly derives from investing or dealing in financial assets.

(2) For these purposes—

(a) if a collective investment scheme is constituted by a person (other than a trustee), who carries on business in the United Kingdom, that person (and no-one else) is a reporting financial institution in the case of the scheme and is to be regarded as the investment entity, and

(b) if a collective investment scheme is constituted otherwise than as described in sub-paragraph (a) and the manager, operator or trustee of the scheme is a person who carries on business in the United Kingdom, the manager, operator or trustee of the scheme (and no-one else) is a reporting financial institution in the case of the scheme and is to be regarded as the investment entity.

(3) In paragraph (1) the “applicable period” is the shorter of—

(a) the three year period—

(i) ending with the person’s most recent accounting date if that date is no more than twelve months earlier than the next reporting date, or

(ii) in any other case, ending on the 31 December immediately before the next reporting date, and

(b) the period—

(i) starting on the later of the first day of the period determined under sub-paragraph (a) and the date that the person commenced the business, and

(ii) ending on the earlier of the last day of the period determined under sub-paragraph (a) and the last day that the person carried on the business,

and “accounting date” here means the date to which a company makes up its accounts.

(4) In this regulation—

“collective investment scheme” means—

(a)

an investment trust within the meaning of the Corporation Tax Acts(1),

(b)

a venture capital trust within the meaning of Part 6 of ITA 2007(2), or

(c)

any arrangements that are a “collective investment scheme” within the meaning of Part 17 of the Financial Services and Markets Act 2000(3);

“financial assets” means—

(a)

assets capable of being the subject-matter of a transaction that is an “investment transaction” within the meaning of the Investment Transactions (Tax) Regulations 2014(4),

(b)

insurance or annuity contracts,

(c)

commodities, or

(d)

derivative contracts within the meaning of Part 7 of CTA 2009(5);

(1)

The meaning of “investment trust” in the Corporation Tax Acts is given in section 1158 of the Corporation Tax Act 2010 (c. 4), section 1158 was substituted by section 49(2) of the Finance Act 2011 (c. 11).

(2)

2007 c. 3. The meaning of “venture capital trust” in Part 6 of that Act is given in section 259.

(3)

The meaning of “collective investment scheme” is given in section 235 of the Financial Services and Markets Act 2000. The power under section 235(5) to provide that arrangements do not amount to a collective investment scheme has been exercised by the Treasury by the following instruments: S.I. 2001/1062, 2001/3650, 2005/57, 2007/800, 2008/1641 and 2008/1813.

(4)

S.I. 2014/685.

(5)

2009 c. 4. The meaning of “derivative contract” in Part 7 of that Act is given in section 576.