From May 2017, some organisations will need to make reports to HMRC under the new ‘Common Reporting Standard’ or CRS. This new international tax transparency legislation will affect charities and could pose a considerable administrative burden for grant making charities in particular.

What is CRS?

CRS has been developed by the Organisation for Economic Co-operation and Development (OECD) and was incorporated into English law in January 2016 as a measure to counter tax evasion. CRS builds upon other information sharing legislation, such as FATCA (the US Foreign Account Tax Compliance Act) and the European Union (EU) Savings Directive. These initiatives involve governments obtaining information from their financial institutions and exchanging data automatically with other nations.

The CRS is similar to the FATCA, however, there are some important distinctions. Whereas FATCA dealt with the exchange of information with the US, CRS involves information exchange on an international basis. Over 70 jurisdictions have committed to introducing CRS by 2017.

The CRS regulations will require UK ‘financial institutions’ to undertake due diligence on their account holders and to make reports to HMRC. Significantly, charities which are exempt from the reporting requirements under the FATCA may be required to make reports to HMRC under CRS.

HMRC has now published specific guidance for charities.

How will CRS affect charities?

Charities will be required by banks or financial institutions to classify themselves for the purpose of CRS and some charities may also be required to make direct reports to HMRC under the CRS.

  • Classification

Charities may be asked by banks or investment managers to complete a CRS self-classification form. The CRS splits organisations into two broad categories: ‘financial institution,’ or a ‘non-financial entity.’ Charities will need to identify which of these categories they fall under and classify themselves for the purpose of the CRS. There are also various sub-categories.

  • Reporting

All ‘financial institutions,’ including charities, may be required to make reports to HMRC. The CRS gives a broad definition to ‘financial institution’ and the classification does not only apply to organisations which provide financial services. This is a key difference between the CRS and the FATCA and means that some charities will now be classified as ‘financial institutions.’ HMRC’s guidance states that if a UK charity is mainly funded by its investment income and any part of its assets is managed under a discretionary investment mandate it may be regarded as an ‘investment entity’ and therefore will be subject to the same due diligence and reporting requirements as any other UK ‘financial institution’.  Endowed charities and those which receive a large proportion of their income from investments are the most likely to be affected. 

A further key difference between CRS and FATCA is that FATCA includes a provision which recognises charities to be ‘deemed compliant’, which effectively works as an exemption from the reporting requirement. This provision is not applicable under the CRS.

Charities that are classified as ‘financial institutions’ will need to identify (by applying criteria specified under the CRS) whether they maintain ‘reportable financial accounts’ which must, as the name suggests, be reported to HMRC. They will be required to perform due diligence on their account holders and will need to report specific information to HMRC. HMRC regards beneficiaries who receive payments from charities as “account holders”, which means that those payments may need to be reported.


It is difficult to predict how many charities CRS is likely to affect but trustees should be prepared to engage with the CRS regime and to consider their charity’s CRS status. For those charities which are ‘financial institutions’, gathering the necessary information and data to fulfil the reporting requirements is likely to be time consuming and the potential penalties for non-compliance are significant.

Further information

There continue to be a number of questions about how exactly the CRS regime will affect charities which are not specifically addressed by HMRC’s charity guidance.

HMRC is running an educational event aimed at charities and their advisers who are affected by CRS and other automatic exchange of information rules on 29 June 2016 in London.  Charities are invited to register an interest by emailing 

If you would like to be kept informed about CRS and its application or would like advice about how it might affect you, please contact Luke Fletcher on or 020 7551 7788.

Posted on 07/06/2016 in Legal Updates

Back to Knowledge