Automatic Exchange of Information and The Common Reporting Standard

Automatic Exchange of information (AEOI) agreements have been made between the UK and many other countries. They allow the exchange of information between tax authorities of different countries about financial accounts and investments to help combat tax evasion.

 The OECD developed a “common reporting standard” for the exchange of information in 2014. Until then information had been shared on request under treaties for sharing tax information, but this was insufficiently effective in preventing tax evasion. In the years since 2014 more and more countries have signed an agreement to implement the standard.

 The Common Reporting Standard (CRS) is an information standard for the automatic exchange of tax and financial information on a global level and the idea was based on the USA Foreign Account Tax Compliance Act (FATCA) implementation agreements.

 The UK regulations impose obligations on UK Financial Institutions (as defined) to collect and maintain information about the residence of individuals and entities for whom they maintain financial accounts. A Financial Institution can include a family trust or a charity.

 The rules are highly complex but the basic information that has to be reported about an individual with a “reportable account” includes their name, address, jurisdiction of tax residence, tax identification number (TIN), date and place of birth, account number, the name of the Reporting Financial Institution and the account balance or value.

 Financial Institutions must use the online system to report to HMRC under AEOI agreements and reporting is required to HMRC by 31 May following the calendar year for which information is required.

 The CRS has already been criticised for not being sufficiently comprehensive, and the jury is out on how effective it will be in improving the fight against tax evasion worldwide.

 The information in this article is believed to be factually correct at the time of writing and publication, but is not intended to constitute advice.  No liability is accepted for any loss howsoever arising as a result of the contents of this article. Specific advice should be sought before entering into, or refraining from entering into any transaction.