IEIM404755 - Charities: Debt or equity interest in a trust: Indirect beneficiaries

IEIM404755: Charities: Debt or equity interests in a trust: Indirect Beneficiaries

Many charities will make grants to one organisation or individual that are for the benefit of another organisation or individual. In some cases it will be clear who the beneficiary of the grant is, and therefore who is the account holder for the purposes of CRS reporting. In other cases it is less clear who is actually benefiting from the grant. In all cases the charity should consider the facts of the particular grant in question, and record the steps it took to reach a decision.

The person that receives a grant from a charitable trust will generally be the beneficiary for these purposes unless that person is acting as a nominee or conduit for the real beneficiary. Where a charitable trust makes a grant to an intermediary charity and the intermediary charity has full discretion as to the ultimate application of the grant the trust may treat the intermediary charity as the beneficiary for these purposes.

Example 1

A charity makes a grant to a university to fund the work of individuals engaged by the grantee to carry out research. The grant is paid to the university, and it has control over how it is advanced to the individuals carrying out the research.

The university is the beneficiary of the grant, and so the account holder for CRS purposes. Although the grant funds the work of the individuals, the research belongs to the university and they have control over how the grant is distributed.

If the individuals move to another organisation taking the research with them, and the grant follows, then it will be for the benefit of the second organisation. Even though it has followed the individuals, it is linked to the research which is now part of the second organisation. The charity will need to carry out due diligence on the second organisation as a new account holder.

If the grant were awarded specifically to the individual carrying out the research, and they had the discretion over its use, then it is the individual who would be the grant holder, and on whom the charity would need to carry out due diligence checks. The treatment will depend on the conditions of the award.

Example 2

A charity provides small grants to needy individuals in the local community, they are used to pay costs like taxi fares to attend hospital appointments and to provide a weekly community meal. The funds are administered by the vicar of the local church, who is not a trustee of the charity.

The beneficiaries are the individuals in the community receiving the benefits of the grants, and so are the account holders for CRS purposes. The charity will need to consider how to carry out due diligence in respect of the individuals [see IEIM404680].

Example 3

A charity provides a grant to refugee families moving to the UK from other countries. The identity of the family is unknown, and the grant is made to the local social services department who use it to buy some household goods for the family, and to provide an amount of cash. The goods will become the property of the family when they move into the local community.

The beneficiary is social services, as they have discretion as to how the funds are distributed, and to which family they are given.