Common Reporting Standing: HMRC Releases Revised Guidance For UK Charities

The Common Reporting Standard (CRS) is, like FATCA before it (a regime established by US legislation, the Foreign Account Tax Compliance Act, which was brought into UK law by a treaty with the US), an information exchange regime aimed at international tax transparency: 'financial institutions' are required to pass information about their clients to their clients' domestic tax authorities with the aim of preventing the use of offshore structures to evade tax. Whereas FATCA dealt with the exchange of information with the US, CRS requires multi-party information exchange around the world.

CRS will affect many charities in two different ways:

the definition of a 'financial institution' (to which CRS applies) is drawn widely and many charities fall within the definition; and charities may be asked by their bank or investment manager to provide details of their CRS status or classification. CRS in brief:

The Organisation for Economic Co-operation and Development (OECD) is responsible for the global CRS regime, which has been implemented at the EU level in a Directive on Administrative Cooperation in the field of taxation (DAC).

The CRS came into force in January 2016. Over 40 countries have signed up as early adopters of CRS, including the UK, and they will start to collect information this year for filing in 2017. Over 70 countries have pledged to introduce the CRS by 2017.

In the UK, the International Tax Compliance Regulations 2015 have been brought in to implement the CRS principles as contained in the DAC. Despite the fact that the Regulations implement a European Directive, they are part of English law and are not immediately affected by the result of the EU Referendum. Due to the international scope of the CRS and the UK's commitment to transparency, it seems unlikely that the UK would opt out of CRS even following a full 'Brexit'.

Exchange of information under CRS is achieved by requiring banks and other 'financial institutions' to collect data on 'Account Holders' and report some of it to their local tax authority annually for onward global exchange.

The Revised HMRC Guidance

The revised guidance for charities went live online on 25 August 2016 and is available here.

In place of the much shorter guidance released in June 2016, the revised guidance contains several detailed sections that link in places to HMRC's general Manual on the Automatic Exchange of Information regime.

The revised guidance explains how UK charities may assess their...