I’m trying to find authority for the following statement from HMRC’s internal manual IEIM400780:
“The ABC family trust’s gross income is primarily attributable to investing, reinvesting or trading in financial assets. The trust was set up on the advice of a law firm and that firm’s own corporate trustee is the trustee of the trust. The corporate trustee acts for the law firm’s clients without itself charging any fees to the clients. Even though the corporate trustee does not charge, it is a Financial Institution by virtue of being an Investment Entity. Its Related Entity (the law firm) is charging the clients for the corporate trustee’s services of managing assets, the corporate trustee therefore primarily conducts as a business, for or on behalf of a customer, the prescribed activities.”
I take it, from the capitalisation, that “Related Entity” means a Related Entity as defined in Article 1, 1(kk) of the “Agreement between the Government of the United Kingdom of Great Britain and Northern Ireland and the Government of the United States of America to Improve International Tax Compliance and to Implement FATCA” dated 12 September 2012 (“the Agreement”), not just some related entity in a looser sense.
My understanding of the manual is that where two entities are Related Entities and one of them (“entity A”) submits bills on behalf of, or in consequence of the existence of, the other (“entity B”) then if those bills are wholly or mainly in respect of investment activity, entity B is an Investment Entity. And this is so irrespective of the nature of the bulk of the business conducted by entity A.
This is not an illogical conclusion. But I cannot find any authority for this anywhere except on this page of HMRC’s manual. Text searches against the word “related” in the Agreement, and in the subsequent HMRC guidance document, and in the 2015 Regulations and (indeed) elsewhere in IEIM, only seem to produce hits for related entities in other completely different contexts.
Can anyone point me to some legal authority, or to some commentary, on this?
Hugh James Solicitors