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UK sets out questions about implementation of Common Reporting Standard

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HM Revenue & Customs (HMRC) has opened a consultation into how the Common Reporting Standard (CRS) should be incorporated into UK law.

The CRS was unveiled by the OECD in July as the global standard for the automatic exchange of tax information in the fight against offshore tax evasion and will be presented to G20 finance ministers for endorsement at their next meeting in Cairns, Australia on September 20 and 21.

The standard will require governments, on an annual basis, to exchange financial account information, including balances, interest and dividends and sales proceeds from financial assets.

From 2017, financial institutions will report this information to their home jurisdiction for accounts held by individuals and entities, including trusts and foundations, that are open on December 31 2015 and such new accounts opened on or after January 1 2016.

To minimise the compliance burden for financial institutions, the CRS builds on the work done to develop intergovernmental agreements (IGA) to allow for the automatic exchange of information under the US Foreign Account Tax Compliance Act (FATCA), but is not identical to them. In an exclusive interview with International Tax Review, Achim Pross and Jorge Correa, of the OECD, explained how both are different.

The UK consultation document asks for views on 21 questions relating to topics such as:

  • definitions in the model competent authority agreements, which will form the legal basis for exchange of information between jurisdictions that implement the standard;

  • reporting and due diligence under the CRS itself; and

  • the interaction between the CRS and the EU Savings Directive, which already requires European financial institutions to report about interest payments they make to non-residents, particularly which of them provides the least burdensome option for business.

Three draft model competent authority agreements were published in the consultation document, covering bilateral, multilateral and non-reciprocal agreements respectively. Only the bilateral and multilateral versions will apply to UK financial institutions, as the non-reciprocal one will not require the UK to exchange information with the other jurisdiction.

The closing date for comments on the UK consultation document is October 22. The government wants any regulations to be in force by March 31 next year.

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