- Original Poster
- #1
Hi everyone
I am planning to invest some of the cash built up in my small company, but to open an account with a broker, I need to self declare if I am an active or passive “NFFE” (non financial foreign entity). This information then gets apparently passed to HMRC who in turn pass it on to the US Internal Revenue Service (I’m not a US person but British by the way).My business gets 95% of its income from trading, but because it’s a services company most of my assets are cash built up in the bank, on which I get a little interest.
The definition of an active NFFE is as follows:
”Less than 50 per cent of the NFFE’s gross income for the preceding calendar year or other appropriate reporting period is passive income AND less than 50 per cent of the assets held by the NFFE during the preceding calendar year or other appropriate reporting period are assets that produce or are held for the production of passive income.”
If you don’t meet these criteria you are a passive NFFE by default (interest on money in a business bank account counts as passive income, I checked).
So by this definition I am a passive, not active, NFFE. I don’t care what I am really and I don’t know what interest my small company has for the US taxman, but I am wondering does self declaring as a passive or active entity have any practical implications for your busines if you are not an American e.g. could it lead to undermining eligibility for entrepreneurs relief in itself if you have self declared to HMRC as a passive entity. Thanks a lot for any thoughts!
I am planning to invest some of the cash built up in my small company, but to open an account with a broker, I need to self declare if I am an active or passive “NFFE” (non financial foreign entity). This information then gets apparently passed to HMRC who in turn pass it on to the US Internal Revenue Service (I’m not a US person but British by the way).My business gets 95% of its income from trading, but because it’s a services company most of my assets are cash built up in the bank, on which I get a little interest.
The definition of an active NFFE is as follows:
”Less than 50 per cent of the NFFE’s gross income for the preceding calendar year or other appropriate reporting period is passive income AND less than 50 per cent of the assets held by the NFFE during the preceding calendar year or other appropriate reporting period are assets that produce or are held for the production of passive income.”
If you don’t meet these criteria you are a passive NFFE by default (interest on money in a business bank account counts as passive income, I checked).
So by this definition I am a passive, not active, NFFE. I don’t care what I am really and I don’t know what interest my small company has for the US taxman, but I am wondering does self declaring as a passive or active entity have any practical implications for your busines if you are not an American e.g. could it lead to undermining eligibility for entrepreneurs relief in itself if you have self declared to HMRC as a passive entity. Thanks a lot for any thoughts!
