Charities are having to get to grips with the Common Reporting Standard (CRS), one aspect of which has been the implications for beneficiaries abroad, where disclosure to the foreign tax authority may give rise to a risk to their human rights. An extremely successful initiative by the Association of Charitable Foundations, with BWB acting as their lawyers, has led to HMRC agreeing to put in place a mechanism to protect human rights.

This new mechanism is set out in guidance issued by HMRC this week. 

How will this affect UK charities?

By way of background, CRS (borne of a multilateral international convention) sets up an international tax transparency regime and creates the Automatic Exchange of Information (AEIO) between participating jurisdictions. The rationale behind this is to reduce rates of tax evasion by those who seek to evade detection by domestic authorities by moving their financial assets outside of their home tax jurisdiction. This will involve governments obtaining information from their financial authorities and automatically exchanging data with other ‘reportable jursidictions’.

Although aimed primarily at investment funds, charities will be considered ‘financial institutions’ for the purposes of the CRS if they rely on investments for more than 50% of their income and where any of those investments are externally managed by under a discretionary mandate. If the criteria are met, the relevant charities will have a duty to register with HMRC, report specific information to those who are tax resident outside the UK, and carry out due diligence which might involve all grant-holders. The funded organisations and individuals caught by this regime will have to self-certify their tax residency status and personal and organisational data.

How will the human rights of overseas grant recipients, further to the new mechanism, be protected?

The rules will require the transmission of beneficiaries’ data to the jurisdiction of their tax residence. In some cases, the activities or background of the individual may mean that supplying this data to the other jurisdiction will place them at risk. The risks may include arbitrary detention, physical attack, harassment, religious persecution and other human rights abuses – for example, a gay activist or a war correspondent receiving a grant and their details being passed to a governmental entity in a country hostile to their activities.

Over the past 12 months HMRC has been working closely with the Association of Charitable Foundations (ACF) and other working groups (Charity Tax Group, Charity Law Association, Charity Finance Group, the Association of Charitable Organisations, and the Ariadne Network of Funders) to get guidance for the protection of recipients’ human rights finalised. BWB has led on the legal issues (potential breaches of human rights, data protection and public law issues) that have been put before HMRC.

HMRC has recognised that there may be cases where the threat to individuals as a result of their information being exchanged may warrant information being redacted from that transmitted.

Unless the ACF, working with BWB, had made the robust legal intervention they did, HMRC would have been unlikely to have constructed the clear, accessible and it is hoped, enforceable administrative arrangements that they have now put in place to review and then withhold from transfer any information which might threaten the human rights of individuals or groups of individuals abroad.


Charities will be alive to the risks faced by their beneficiaries abroad as a result of CRS and the reporting requirements. Following this guidance will help and actively ensuring any risk is raised with HMRC will start the process of redaction of data being transmitted. It will be important to follow up on any such report to check that HMRC considers any risk and carries out the redaction. If it is not agreed, there will be a review process in place and potential legal remedies as a last resort (ie judicial review).

If a charity is concerned about the human rights implications associated with any information it is required to report under the AEOI agreements it should contact HMRC at to discuss those concerns. It will be important to record in writing any concerns raised and, as mentioned above, to follow up on the outcome.

If you would like to discuss anything from this eflash please contact Melanie Carter, Head of Public & Regulatory Department on 020 7551 7610 or

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Melanie Carter

Partner and Head of Public & Regulatory

+44(0)20 7551 7615

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Posted on 26/01/2017 in BWB Publications

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