The Common Reporting Standard (CRS)

What is the CRS?

The CRS is where most tax authorities around the world will automatically exchange information about financial accounts held in another jurisdiction to where the postal address is stated. In other words, if an account is held in France by an account holder with a UK postal address, the French bank will provide details to the French tax authorities who in turn will exchange it with the UK tax authority, HMRC.

How often is information passed to HMRC?

The reports are compiled automatically each year giving data as at 31 December where the balance on the financial account exceeds the equivalent of 50,000 euros.

This in itself can cause confusion as the UK tax year does not follow the calendar year which is why such letters will invariably quote two tax years because HMRC is not sure in which year the information (for example the interest earned) should be returned either in full or in part.

Why could this information be wrong?

Firstly, it is a relatively new procedure using new software. Secondly there have been many examples of different (human) errors and misunderstandings.

It can be that the account is held by more than one person and the report is only made in respect of the first named account holder. The first named account holder may simply be a signatory and the funds relate entirely to the second account holder, not the first account holder.

What will HMRC do with this information?

Any information held by HMRC on a taxpayer will be collated in order that a better understanding of their financial (and tax) position is obtained.

Often HMRC will raise letters seeking a “Check on tax position” because they were previously unaware of whatever is now being reported under CRS. There is a presumption that HMRC should be aware when in fact there is no income or gains that has to be reported. There are many taxpayers who may be connected to an offshore “structure” such as a holiday home or a trust. It doesn’t mean to say that there is either a reporting requirement to HMRC or that there is any income or gains on which tax has not been paid.

However, until HMRC have received your response to their letter, HMRC will assume the information is correct under CRS and pursue any taxpayer believing that they may have something to explain or to hide. HMRC does not check the CRS information with the relevant tax authority first.

Help is at hand

If you would like to discuss this matter further, please contact me at paul@pmc.tax or on 07979 313 010.

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