Question

A charity has been sent a substantial amount of paperwork by their bank, HSBC, which includes an 11 page return and a copy of US IRS form W-8BEN-E. This all apparently relates to the Foreign Account Tax Compliance Act (“FATCA”) and in effect requires all organisations trading on the UK to provide voluminous evidence to prove that they are not involved in money laundering. The charity understands that this is a US-inspired piece of legislation which the UK government has agreed to adopt. Whilst the underlying objective may be totally laudable, the process for SMEs and similar is potentially horrifying. A larger organisation will no doubt be able to divert resources to deal with the mountain of research and paperwork required but that does not work for a very small charity.

Even the thought of taking professional advice would stretch the limited resources of such a charity quite considerably. Unfortunately HSBC have not, in the opinion of the charity, been particularly helpful and have asserted that they “cannot give any advice”. They also say that all other banks and similar institutions are having to do the same thing although this is the first time the charity has heard of it, and they do have contacts with other major banks in a number of different capacities.

The question to other charities are:

1. Have you come across this before?
2. If so, what have you done about it; and
3. Is there any truth in the suggestion that charities (at least small ones) are to be exempt from complying with this?

If you have any information on this, then please reply so that this can be passed on to the charity and other members of the Charity Forum Connect.

Responses

1. UK Charities are usually deemed compliant FI or certified.  Usually you will have to complete documentation to confirm that you are a UK Charity.

2. This response from a Panel Member (accountancy firm) – Yes, we can help as we have a FATCA team in London to help us (Wealth Managers) deal with the issues, which are not straight forward. I am not sure about the exemptions for charities but will ask the question? I would be happy to meet the charity and provide assistance where I can.

3. This response from a Panel Member (accountancy firm) – We are seeing a lot of these forms later, particularly from HSBC. I’ve not had experience of Charities being subject to them only businesses. Unfortunately it needs to be completed. If not completed a business in the US paying a non US entity is likely to deduct 30{ba3215b0bf35eaeb06be458b3396ffbfc50bb9db10c9ff1594dfc3875e90ea48} withholding tax, which is unlikely to be repaid. My understanding is that charities are not exempt. However they should be able choose the non-profit making entity which means you cannot ignore the rest of the form. I will send you the CFG commentary on the subject.

4.  I returned this paperwork to HSBC on 28/09/15. I only filled in the FATCA paperwork ensuring that it was clear there were no US dealing/transaction.

5. This response from a Panel Member (bank) – My understanding is that this affects US citizens only. Therefore unless the charity has any of the four following that do not need to complete the form:
   1. US citizenship or US residence
   2. US place of birth
   3. US address (including US PO boxes)
   4. Only a US telephone number (or numbers).
6. Yes, all banks have a regulatory duty to carry out these checks. Our main bank, CAF Bank, has sent me a four page questionnaire which I must complete – so I may need to ask the Trustees some questions at the next Board! Quite how individual banks approach this task is up to them, as long as they ultimately comply. And, no, we are not completing US IRS form W-8BEN-E but then CAF Bank does not have an equivalent US branch. I guess banks must comply with the regulations of the country in which they operate – and I believe it was HSBC which was exposed as failing in this respect, so I can see why they may be over cautious. It may help the charity concerned to research the regulatory requirements in UK, then approach HSBC if a less onerous procedure would suffice.
7. My understanding is that it is only required if the organisation holds US assets in investments or anywhere in any form, which may be why this charity has been asked. My charity has not been required.
8. Does the charity gave any investments? The form needs to be completed in respect of US securities held so that you can benefit from a lower rates of US withholding tax on your holdings. The form needs to be completed every three years.
9. Further to our conversation earlier this afternoon I confirm that I have spoken with our own bank and my understanding is: Lloyds have been asking for detailed information relating to all our Trustees, including those who do not currently access our bank accounts, however this is in relation to the requirement ‘know your client’. Lloyds are aware of the FATCA regulations however their understanding is that these impact solely on individuals and organisations that have links to the USA – eg Resident, trading with, receiving monies from or remitting monies to. There is a lot of information on various websites, however I hope the attached basic Santander FAQ document may be of some assistance in clarifying the requirements. The banks, as institution who trade in the US and have clients that do so also, need to comply but it would appear that they should be focusing their enquiries only on customers who have links.Conclusion being that if HSBC have undertaken their responsibility to ‘know their client’ they should also know whether individual charities are exempt due to the nature of their status (ie no financial links to the US).
10. Response from a Panel Member (accountants) – Please find attached a guidance note that we have prepared to help our charity clients navigate this very tricky area. It is all so new that it is understandably causing charities as well as financial firms a great deal of trouble and head scratching! Contrary to your comment, the legislation is not about money laundering but about tax evasion with the USA starting the whole process.FATCA actually came in a year or so ago and I expect that your private client team will be familiar with it in respect of their Trust accounts so you may find it helpful to discuss with them. Charities were exempt from the first wave as consultation continued and there was a lot of lobbying by the charitable sector to keep UK charities exempt. Unfortunately, that was unsuccessful and the first annual round of reporting will begin in 2016.We are in the process of talking to our own clients about FATCA and I have heard from many of them that they have also heard from their banks with HSBC commonly mentioned amongst others.If you read our guidance and also refer to the websites in the footnotes, I think it will provide some comfort that in the majority of cases, this need not cause much trouble for your charity clients.
11. Thank you for asking the question and Yes at Simon Says we have received the questionnaire from HSBC bank.To me and I have not consulted with anyone it is a requirement by the bank as a result of government legislation. As we are not involved in foreign investment or income this is a one off requirement. It is for record keeping only if not involved in foreign investment/income. I have completed the form using N/A as appropriate Currently only requiring a second trustee signature. I then intend to hand into our HSBC branch and trust the matter is completed. Should it be required that say a regular return is required and records kept then I feel we should object and complain to the bank and Charity Commission. Should any charity of any size have foreign investments or income then the whole matter changes. That is how we have dealt with the matter at present and hope this is of some help.
12. I have encountered this issue. One of our trustee/directors, on her appointment, needed to declare the interest to a US company for which she acted a barrister for. The US firm requested FATCA compliance. We checked trust definitions on the HMRC website and concluded that we were a UK resident trust – resident in the UK for tax purposes. We provided this information along with our status as a registered charitable company in the UK, a non-profit-making organisation, not liable for tax. The US company accepted this explanation and we were not required to comply with the FATCA process. I hope this helps.
13. We did have to supply proof of ID and signed declaration for all legal representatives of the companies, (Directors and Co Sec), and there was a lengthy form. All related to money laundering and account management but I do not recall what it was called or if it was UK or US based. Only that I was relieved when it was finally done and accepted, secure in the knowledge that we only had to leap through that hoop once. Ensure that you have copied the form so that you do not have to do all the work again if necessary for another bank/accountant/financial advisor/lawyer/etc. Don’t think that there is any way round it. Hope that helps.
14. We had a similar form from HSBC, with whom we have just one very small account. We have our main accounts with another high street bank and have not, so far, had anything similar from them. We also found HSBC completely un-helpful with this but if you take the time to look at the form it isn’t actually that daunting. Just complete the first page with your name and address and, if appropriate, that you are incorporated in England, tick the box on one page of the form that you are a non-profit or charitable organisation and give your charity registration number, ignore all the other boxes as not relevant, sign the declaration and complete the acknowledgement slip and post it back, with a photocopy for your records showing that.
15. Yes I do know about this and have just completed on behalf of the charity I am Trustee of. It’s a lot of pieces of paper and look quite daunting!!! but actually for most small charities a lot of it does not apply. It does have to be completed. I am very happy to chat to Paris Smith to talk through and simplify.
16. Don’t worry about this. I have attached a paragraph from their legislation pack.
    International agreements to improve tax compliance
    The Foreign Account Tax Compliance Act (FATCA) aims to combat tax evasion by US tax residents using foreign accounts. It includes certain provisions on withholding taxes and requires financial institutions outside the US to pass information about their US customers to the US tax authorities, the Internal Revenue Services (IRS). Failure to meet these new reporting obligations would result in a 30{ba3215b0bf35eaeb06be458b3396ffbfc50bb9db10c9ff1594dfc3875e90ea48} withholding tax on the financial institutions. The FATCA provisions impose new and substantial burdens on UK businesses in identifying US taxpayers, and registering and reporting information to the IRS. Significantly for UK institutions the Data Protection Act precludes UK businesses from passing the required information to the US.It is mainly to catch US unpaid tax earnings.
17. Yes, we received these forms and I have completed them and sent them back to HSBC. They did take a while to work through in order to understand what they were asking for and to determine which category we fell into. I then went through them briefly with Lara and Gareth before they signed them.I also emailed the Board members asking them for their personal details for inclusion on the form and asked at a Board meeting for them to confirm that they were not individuals or had family members considered to be of influence in the areas quoted on the form. With regards to the transaction information I took a typical month’s worth of data and put in an average number or a range for what I thought it would be. I did feel that for HSBC to be asking for this was a little ridiculous, given that they have access to our bank account and could probably have gathered the data electronically much more efficiently.I sent the form back without some of the address data for a couple of Trustees, like date moved in or DOB, as I didn’t get a response in time and given that HSBC were “threatening” to put a stop on the account I thought it better to send back the form with 90{ba3215b0bf35eaeb06be458b3396ffbfc50bb9db10c9ff1594dfc3875e90ea48} of it complete, rather than wait and run into problems. We were prepared in some respects in that we had some of the data required already, due to the Board Trustees’ being signatories on our bank account and we had taken copies of the identification that they provided for these purposes.We didn’t receive a copy of US IRS form W-8BEN-E, but I thought that was completed if you had shares in a US listed company, so I would imagine that if the charity has investments in shares in US companies this also requires completion.

    Unfortunately, the forms are typical of the level of influence that business activities and the SEC in the US has over the UK and I have experienced this in the past with other things. The forms are daunting and do require some time to work through and gather the data required.

18. My understanding is that UK Charities registered with the Charity Commission are not obliged to complete such forms, although the rules are unclear and may have changed. I did speak to our local HSBC branch and they told me that if I have received the document it means that it has to be completed, but I now get the impression it has been sent out to all their clients classified as ‘Business Accounts’ regardless of status.I have, therefore, rightly or wrongly, signed only the form and returned it to HSBC explaining the charitable status of the NMTP. I am sure that if they are not satisfied with this course of action they will get back to me – I will keep you informed.My other thought was that Charities should write to the HSBC Compliance Department to clarify the position.

Please note any attachments mentioned above have been attached to an email sent to all Forum Members.