Common Reporting Standard – Implications for Charities

The Common Reporting Standard (CRS) came into force in January 2016. It is an information exchange regime aimed at international tax transparency. Under CRS “financial institutions” are required to report information about their clients to their client’s domestic tax authorities with the aim of preventing the use of offshore structures to avoid tax.

Unfortunately the definition of a “financial institution” is very wide, and can cause charities to fall into the regime.

Definition of a “financial institution”

There are two key points which indicate that a charity, may be a “financial institution”:

  1. In the last three calendar years more than 50% of income was derived from investments, and
  2. At least some part of the charity’s assets are managed by an external investment manager

It is possible that banks or investment managers may ask charities to provide details of their CRS status. In which case charities will have to self-certify as to whether they are a “financial institution” or an “active non-financial entity”.

Charitable financial institutions must provide information to HMRC on “reportable account holders” on an annual calendar year basis. The first reporting deadline is 31 May 2017 for the 2016 calendar year. If however, the charitable financial institution has no reportable account holders, no return is required and the charity does not need to register with HMRC for an Automatic Exchange Of Information (AEOI) account.

Reportable financial account holders

This depends on the legal form of the charity and whether the account holder resides in a reportable jurisdiction. Note that no report is required in respect of UK resident account holders (although information is still required to be collected for every account holder even if it isn’t reported).

Charitable companies (whether limited by guarantee or by shares) and Charitable Incorporated Organisations (CIO):

  • Holders of loans made to the charity, whether formal or informal, including interest free loans
  • Shareholders, or anyone with an interest in the profits or capital of the company (members of a company limited by guarantee, charity incorporated by Royal Charter or CIO are not considered by HMRC to hold an equity interest in the company)

Charitable trusts and charitable unincorporated associations:

  • Holders of loans made to the charity, whether formal or informal, including interest free loans
  • The settlor, protector (if there is one), beneficiaries entitled to mandatory distributions, beneficiaries receiving discretionary distribution (including anyone receiving a grant or distribution).

It is likely that CRS will be much more burdensome for charitable trusts and other incorporated charities as they will have to gather information on every grant recipient.

Due diligence

Financial institutions are required to carry out due diligence on the account holders of all financial accounts to determine if they are resident in a jurisdiction participating in CRS. However, the information is only reportable to HMRC if the recipient is tax resident outside the UK and resident in a participating jurisdiction ( As such UK charities which are purely UK based and only make grants within the UK may not be required to make a report to HMRC. However, they will still be required to collect the following information from account holders:

  • Name
  • Address
  • Jurisdiction of tax residence
  • Entity status (only applicable to entities)
  • Tax identification number(s) – only required if the recipient is non-UK resident
  • Date of birth (only applicable to individuals) – only required if the recipient is non-UK resident

This information should be kept on file for six years, whilst ensuring that data protection rules are adhered to.

It will be important for financial institutions to ensure that appropriate systems are in place to collect and store this information. Whilst there is no prescribed format for the collection of the information, the account holder must sign or positively affirm that the information provided is correct.

Information to be reported

If a charity does have reportable account holders, then they must provide the following information to HMRC for the relevant calendar year by the following 31 May:

  • Name
  • Address
  • Taxpayer identification number(s)
  • Jurisdiction to which the information is reportable
  • The account number
  • The name and identifying number of the financial institution
  • The account balance at the end of the calendar year
  • Date of birth (only applicable to individuals)
  • The total gross amount paid or credited to the account holder in the calendar year


Financial Institutions with reportable account holders must register for the automatic exchange of information (AEOI) by creating an online account on HMRC’s website.


HMRC can charge a penalty of £300 for a breach of an obligation under CRS (including late filing). HMRC can also charge a penalty of up to £3,000 for the provision of inaccurate information.

However, we understand, that in the early years of AEOI HMRC will be taking a “soft landing” approach. So where charities have made effort s to carry out due diligence and report accurately penalties shouldn’t be applied.

Action required

There isn’t much time left before the first reporting deadline of 31st May, therefore if you haven’t already considered whether your organisation is a financial institution you should do now.

If your charity is a financial institution you should then consider what steps need to be taken to comply with the new rules.

If you would like to discuss CRS further please don’t hesitate to contact Louise Cottam or Simon Brown.