Regulatory updates

Common Reporting Standard: Is your charity affected?

27/01/2017

If your charity gets more than 50% of its income from investments then you may well be affected by the Common Reporting Standard (CRS), and have reporting obligations to HMRC (by 31st May 2017).

The Common Reporting Standard is the result of the drive by the G20 nations to develop a global standard for the automatic exchange of financial account information, aiding the tax authorities in participating jurisdictions to reduce tax evasion. Although it came into force at the beginning of last year, HMRC have only this week finalised the guidance for charities, after a long period of consultation with a working party which included Kate Rogers, Cazenove Charities’ Head of Policy.

Determine whether you are an investment entity

The regulation is aimed at ‘financial institutions’ which include banks, custodians, depositaries, insurance companies and investment entities. It is the latter that includes some charities and foundations. If your charity derives more than 50% of its gross income from financial assets (over the last 3 calendar years) and if any of the investments are managed on a discretionary basis then you are likely to meet the definition of an investment entity.

Consider your due diligence and reporting obligations

Investment entities have due diligence and reporting obligations. They must identify their ‘account holders’, carry out due diligence on these account holders and fulfil their reporting obligations to HMRC.

For charitable trusts or unincorporated charities these account holders include all grantees and settlors. Due diligence requires tax residence data to be collected on all grantees and settlors, and to report any who are tax resident in a reportable jurisdiction to HMRC.

Incorporated charities (including those established by Royal Charter or Acts of Parliament) are likely to be less affected, although still have to report any equity or debt interest holders resident in a reportable jurisdiction. Please note incorporated charities may still hold assets in trust (e.g. permanent endowment) and may therefore have additional reporting obligations.

Richard Jenkins, the Head of Policy at ACF, has prepared some useful material available on the ACF website – including a flow chart to help you identify how your charity is likely to be affected.

As a financial institution ourselves, we will be required to identify our own ‘account holders’ and so will be in touch with our clients to ask for information in due course. We are unable to give tax advice, but if you would like a general discussion on the Common Reporting Standard and its implications for charities then please do get in touch.

For more information please see the HMRC guidance for charities.

Author

The opinions contained herein are those of the author and do not necessarily represent the house view. This document is intended to be for information purposes only. The material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. The material is not intended to provide, and should not be relied on for, accounting, legal or tax advice, or investment recommendations. Information herein is believed to be reliable but Cazenove Capital does not warrant its completeness or accuracy. No responsibility can be accepted for errors of fact or opinion. This does not exclude or restrict any duty or liability that Cazenove Capital has to its customers under the Financial Services and Markets Act 2000 (as amended from time to time) or any other regulatory system. Cazenove Capital is part of the Schroder Group and a trading name of Schroder & Co. Limited 12 Moorgate, London, EC2R 6DA. Authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. For your security, communications may be taped and monitored. 

Contact Cazenove Charities

Achieving your charity's investment objectives takes time and thought. To find out how we can help you please contact:

Giles Neville

Giles Neville

Head of Charities giles.neville@cazenovecapital.com
John Clifton

John Clifton

Business Development Manager john.clifton@cazenovecapital.com