HMRC has published guidance for charities to help them decide whether they have to report financial account information under the automatic exchange of information requirements, which are designed to curb aggressive tax planning
Broadly, between 1 January 2016 and 2017, the Common Reporting Standard (CRS) will gradually replace the Crown Dependencies and Overseas Territories (CDOTs) agreements.
This means that charities who are ‘investment entities’ (generally financial institutions), must collect data on financial accounts for the calendar year to 31 December 2016 and report it to HMRC by 31 May 2017.
According to HMRC, charities do not have to provide financial account information ‘if income is mostly from’ the following:
- gifts;
- donations;
- grants; and
- legacies.
There’s also no need for your charity to report under the USA’s Foreign Account Tax Compliance Act (FATCA). This is due to the UK’s agreement with the USA excluding registered charities from FATCA’s requirements.
The CDOTs agreements came into effect from 1 January 2015, with first reporting due by 31 May 2016. The CRS came into effect from 1 January 2016, with first reporting due by 31 May 2017.
The HMRC Automatic Exchange of Information: guidance for charities is available here.