CRS - new levels of global tax transparency

The Common Reporting Standard (CRS) is a global system that allows different countries to share information about the taxes that they collect, to contribute to a cross-border view of who should be paying what tax.

Over 100 countries have now signed up to this system. Banks and other financial organisations from these countries are required to pass on information about their clients, creating a picture of tax liability that the world has never seen before. CRS is a step change in the war on tax evasion.

If you would like to understand how CRS will affect you or your clients

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UK taxpayers act now


Are you a UK taxpayer with global interests? In March 2017 HMRC published draft legislation requiring anyone with offshore interests to 'correct' their tax plan by 30 September 2018 or face hefty penalties.

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Which countries are participating?


As the world became more global, a forum was established to exchange tax information by the Organisation for Economic Co-operation and Development. Very few countries are holding out and not signing up to CRS. Click here for the latest OEDC list of which countries are signed up to share information on their taxpayers.

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Who is affected by CRS?

If you are considered resident for tax purposes in a country that has signed up to CRS, and you have global interests in another participating country, you need to think about your tax plan.

Your bank, your insurance company, trust company or provider or other financial advisor will pass information about your finances via the central portal. This data will be used to identify anyone who might have evaded or avoided tax in one of the 100 or so countries, or who might have made a mistake and missed a tax liability.

Think carefully about whether this might affect you. If you are a director or a shareholder in the UK running a company established offshore, CRS will affect you. If you are a beneficiary or trustee of an Channel Islands trust, CRS will affect you. If you donate to a charity that manages sizeable investments that are externally managed, CRS will affect you.

FAQs


Does this affect me if I do not have any assets overseas or interests in overseas entities?

No. You should be aware though that there are a number of personal and criminal penalties relating to non-compliance in tax matters that also apply to purely domestic tax situations.

Is it just information from bank accounts that will be shared?

No. The data collected will relate to any financial account, and where a person has an interest of some kind in structures such as companies partnerships and trusts. Insurance companies, trusts and trust providers (TCSPs), investment entities and anywhere that will look after your money for you will report on your financial data.

HMRC refer to their ‘straightforward online disclosure facility’. Should I do this?

The disclosure facility may be the right answer for some cases and in general it is better to make a voluntary disclosure than wait for HMRC to find out and pursue you as the latter route is bound to involve greater penalties. Criminal penalties are also possible. However, there are significant penalties relating to the disclosure facility and we would urge you to take advice either from us or your accountant or both before making contact with HMRC.

The CRS sounds like a gross breach of privacy. Is there any way to protect my information or prevent it being transferred?

On the face of it no. However a number of people are raising the serious privacy concerns with, for example, the EU. The EU data protection body has issued warnings about the possible effects and breaches of data protection legislation. If you have real concerns that reporting could cause you harm please talk to us as our reputation management team are working on this topic.

Do we know when the UK legislation (the ‘requirement to correct’) will come into force?

No date has yet been set but we expect that it will be in the Finance Act which is to be brought before Parliament in the autumn. It is likely to take effect from 2018. In any event it relates to breaches which occurred in the past and so any such breaches should be dealt with as soon as possible.

What about charities?

In the UK, charities will count as ‘financial institutions’ under CRS if they typically derive more than 50% of their income from investments, and where the trustees have given discretionary management over to external investment firms. Click here to read our latest guidance for charities.

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Financial institutions implementing CRS

This is obviously a major compliance task, and particularly challenging for smaller to mid-sized organisations and for some of our charity clients. You need to tell your clients clearly what is happening – it is essential that they are informed. In the UK, HMRC have provided a specific timeline for organisations to communicate with their clients about CRS by. We are working with institutions to help them and their clients correct any tax irregularities, or to communicate with their local tax authority advance of time.

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