Common Reporting Standard (CRS)

What is the Common Reporting Standard (CRS)? What are the consequences of the CRS? 

This is a freeview 'At a glance' guide to the Common Reporting Standard (CRS).

At a glance

The Common Reporting Standard (CRS) is a global standard for the automatic exchange of information developed by the Organisation for Economic Cooperation and Development (OECD) in 2014.

The CRS requires financial institutions operating in an OECD member country to apply standardised due diligence procedures to customers, including the determine the customers' country or countries of tax residence.

Reporting obligations are for financial institutions include all banks, asset managers and some insurance companies.

Information is reported to their domestic tax authority annually for onward exchange with other jurisdictions.

For UK institutions, the CRS requires financial institutions to report information on non-resident account holders to HMRC

Financial institutions and certain relevant persons, including professional businesses providing tax advice, will be required to notify certain clients:

• That HMRC will soon be getting data on overseas financial accounts.
• That there are opportunities to come forward about your overseas tax affairs if you need to.
• About what could happen to those who don’t come forward.

Crypto-Asset Reporting Framework (CARF)

• The CARF requires changes to CRS. The government has published the draft regulations in October 2024
• Proposed amendments will change the scope of the CRS regime, introduce mandatory registration of reporting Financial Institutions (FIs) and change the penalties regime, aligning it with the Model Rules for Digital Platforms (MRDP) regime

Reports

Crown Dependencies and Overseas Territories started reporting during 2017.

The data that is reported to HMRC includes:

• Personal identification details: name, address, date of birth.
• Account numbers.
• Year-end balances and valuations.
• Interest credited.
• Proceeds of assets sold.

Reports include information on remittance basis users.

Banks are not under any obligation to notify their clients that information can or will be disclosed to tax authorities of other CRS member countries.

Disclosure

Individuals with assets overseas should check that their affairs are compliant: if they are then they will have peace of mind.An unprompted disclosure can be made to HMRC. See Making a tax disclosure  or HMRC Disclosure of Cryptoassets Income and Gains

Client notification

Agents should consider the requirements of the International Tax Compliance Regulations 2015 SI 2015/878, as amended by The International Tax Compliance (Client Notifications) Regulations 2016, which are effective from 30 September 2016 and which will require them to contact certain clients to tell them about the Common Reporting Standard.  

HMRC launched a quick 12-day consultation on the proposed regulations in February 2016.

The original deadline for client notifications was 30 April 2017, however, due to delays in publishing guidance on this issue the deadline for notifying clients was set as 31 August 2017.

Notification is required by reporting financial institutions under the Directive in Administrative Co-operation (DAC) or the CRS, and also includes a relevant person who:

• Provided offshore advice or services in the course of business.
• Referred an individual to a connected person outside the UK for the provision of advice or services relating to the individual’s personal tax affairs.

Offshore advice or services means in respect of a participating jurisdiction, see schedule 1 of International Tax Compliance Regulations 2015 SI 2015/878, or the US, and relating to:

1. A financial account held in that jurisdiction.
2. A source of foreign income as defined by s.830 ITTOIA 2005 arising in that jurisdiction.
3. A source of employment income, as defined by s.7(2) ITEPA 2003, arising from that jurisdiction.
4. An asset held or situated in that jurisdiction.

Connected person has the meaning set out in s.1122 Corporation Tax Act 2010.

There may be a requirement to notify UK and non-UK persons.

Schedule 3 to the regulations sets out the form of the notification, see Client Notification (offshore bank accounts and investments).

OECD Model Mandatory Disclosure rules

In March 2018 the Organisation for Economic Co-operation and Development (OECD) issued new Model disclosure rules requiring intermediaries such as lawyers, accountants, financial advisors, banks and other service providers to inform tax authorities of any schemes they put in place for their clients (as promoters or service providers) to avoid reporting under the CRS or to disguise beneficial owners of offshore entities or trusts.

 As of March 2023, the UK now follows the OECD Model rules. See: Mandatory Disclosure (DAC6): Do you need to make a report?

What action HMRC will take on receipt of all this new data remains to be seen, however, it is likely that a number of potentially costly investigations will be opened, and that invitations will be issued to individuals to encourage them to make disclosures where they are not able to confirm compliance.

External link

HMRC List of participating territories