As discussed in our
earlier briefings, the Common Reporting Standard (CRS) is
designed to combat international tax evasion by allowing countries
to swap information on each other's tax payers. This is
achieved by requiring banks and other 'Financial
Institutions' to collect data on 'Account Holders' and
report some of it to HMRC annually for onward global exchange.
Surprisingly for some, charities can be 'Financial
Institutions' and so caught in the reporting web. The key
consequence for those charities is having to collect information on
their charitable grantees and report on some of them. Reporting
charities will also need to collect information from their
settlor(s), if living, and may need to report it.
The guidance for charities went live online on Friday 3 June and
is available here.
The guidance is short and links in to HMRC's general
guidance on the Automatic Exchange of Information in several
places. It explains the due diligence and reporting requirements in
very brief terms and charities may find it lacking in detail,
particularly where the more general guidance may be difficult to
apply to the circumstances of charities.
There are no substantive changes from our
earlier briefing to flag, but charities reviewing the guidance
might find the following clarifications useful:
Reporting - A reporting charity must report to HMRC on its
'Account Holders' – for a charity this will be any of
its charitable grantees who are tax resident in a 'reportable
jurisdiction' and have in fact received a grant in the
reporting year, and may include the settlor(s) if living.
Due Diligence - HMRC have indicated that the manner in which
self-certification of tax residence is obtained by a reporting
charity is flexible. Including additional queries in an existing
grant application form is acceptable. It is also worth clarifying
that not all jurisdictions issue Tax Identification Numbers, so a
charity needs to ask for this number, but may not receive one.
UK grantees - Though not emphasised in the guidance, the UK is
not a 'reportable jurisdiction', so grants made to
individuals and entities that are tax resident in the UK require
only limited due diligence but will not require reporting to HMRC.
For UK registered charity grantees, due diligence can simply
comprise confirming the charity's registered number.
We are working with sector bodies as part of an HMRC working
group on charities and the CRS and shall be letting HMRC have
comments and suggestions on the guidance with a view to making it
clearer and more helpful. If you have any comments or suggestions
you would like to feed in to HMRC, please let us know.
HMRC is holding an informational event for charities on CRS on
29 June 2016. If you are interested in attending, please contact email@example.com.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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An assignment of rights under a contract is normally restricted to the benefit of the contract. Where a party wishes to transfer both the benefit and burden of the contract this generally needs to be done by way of a novation.
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