Posted: 19. June 2016 by: Rupert Tennant

The Effect of the Common Reporting Standard (CRS) On Charities

The Common Reporting Standard (CRS) is a part of tax legislation originated by the Organization for Economic Co-operation and Development (OECD).  It was initially designed to combat international tax evasion by allowing countries to swap information on each other’s taxpayers. Ideally, this is meant to be achieved by requiring banks and other financial institutions to collect data on account holders and remit it to HMRC for an onward global exchange on an annual basis.

How exactly does this legislation affect charities?

Surprisingly, charities can be regarded as financial institutions. Therefore, they are caught in the reporting web. The key consequence for charities is a requirement to collect information on their charitable grantees or account holders and report on some of them. Reporting charities are also required to collect all the information from their settlor, if living, and may need to report that information as well.

Which charities will be affected by CRS?

A UK resident charity is regarded as a ‘financial institution’ if more than half of its income is derived from investment income and its financial assets are or have been managed by another financial institution (such as a fund manager) in the last three years.

What are the reporting requirements?

In line with the CRS, charities are required to report details of payments made to beneficiaries under the terms of its charitable objects. Even though this includes discretionary payments, it excludes payments to suppliers for goods and services. The legislation refers to these beneficiaries as account holders of an equity interest. This includes anyone who may receive a grant directly or indirectly. The charity must report the payments to these beneficiaries where they are tax resident outside the UK in a reportable jurisdiction.

In addition, there is also a requirement for the charity to obtain a self-certificate from the beneficiary showing where the recipient is tax resident. If this is outside the UK, the charity should include the name, address and Tax Identification Number. If the recipient is an independent entity, it must also include the entity’s classification.

Impact on the UK to UK payments

Although not emphasised in the legislation, the UK is not a reportable jurisdiction. Thus, any grants made to individuals and entities that are tax resident in the UK require only limited due diligence but will not require reporting to HMRC. For the UK registered charity grantees, due diligence can simply consist of authenticating the charity’s registered number.


HMRC has published the CRS legislation for charities. The legislation is short and relates to HMRC’s general guidance on the Automatic Exchange of Information in several places. It goes a long way to explain the due diligence and reporting requirements in very brief terms. This makes it easy for charities to find it lacking in detail, particularly where the more general guidance may be difficult to apply to the circumstances of charities. It also uses conditional language since HMRC was not initially aware that the legislation included charities.