What is the Common Reporting Standard (CRS)?
The CRS, under the Standard for Automatic Exchange of Financial Account Information, is one of the UK’s global standards, which tackles tax evasion by releasing information on an individual’s overseas wealth to financial institutes of member states. In the past, this had only been made mandatory for companies, however, since January 2015, under the Crown Dependencies and Overseas Territories (CDOTs) agreement, charities must now comply. From January 2016 and 2017, the CRS will slowly be replacing the CDOTs, with the aim to increase trust and combat c-level offenses within UK organisations.
What charities are affected?
On 3 June 2016, HMRC announced that charities that are considered a financial entity will be subject to the reporting standard and will be expected to submit relevant financial information. A charity is considered a financial entity if:
- It is managed by a financial institution
- It has more than 50% of income deriving from investing in financial services
What steps need to be taken?
If a charity is considered a financial entity, a due diligence check must be carried out on each account holder or beneficiary with overseas wealth, as well as a self-certification, which must be submitted to HMRC. This self-certification must detail the individual’s residence, financial accounts and Tax Identification Number. It is important to note that any payments made from the charity to the beneficiary will need to be disclosed. For those charities that do not currently carry out financial reports, HMRC will reveal in due time what information must be declared.
The first deadline for charities subject to the new CRS reporting requirements is 31 May 2017. All charity financial reports must be collected between 31 December 2016 and 31 May 2017. However, it is important for charities who believe that their charity may fall victim to these new requirements to seek advice sooner rather than later.
If you would like to discuss your personal case in further detail, please contact Suda Ratnam at suda@raffingers.co.uk.
For charities who need to report information, this can be done on the Automatic Exchange of Information Online Service via Gov.uk.
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