The Common Reporting Standard (CRS) is a global standard for the automatic exchange of information between the tax authorities of participating countries. It has been designed to prevent individuals and entities using offshore structures to evade tax and has important implications for charities. Some charities, especially those that have a trust structure and receive the majority of their income from investments, must comply with the requirements of CRS.

This note provides an overview of when a charity is subject to CRS and, if so, its obligations.

Is your charity regarded as a Financial Institution and so subject to CRS?  

A charity will be subject to CRS if it meets the definition of a Financial Institution. There are a number of categories of a Financial Institution within the CRS regime. Relevant to charities is that of an Investment Entity. A charity will be an Investment Entity if:

  1. Its assets are managed by a Financial Institution; and
  2. It meets the financial assets test.

These two criteria are outlined below in further detail. If both criteria are met, a charity will be a Financial Institution and so subject to the CRS regime. If the criteria are not met a charity will not be subject to CRS.

  1. Assets managed by a Financial Institution

A charity’s assets are managed by a Financial Institution if:

  1. The Financial Institution performs, either directly or through another service provider, services which broadly involve investing, administering or managing funds or money on behalf of other persons; and
  2. The Financial Institution has discretionary authority to manage the charity’s assets either in whole or in part.
  3. The Financial Assets Test

A charity meets the Financial Assets Test if at least 50% of its income was attributable to investing, reinvesting or trading in financial assets (assets such as stocks, shares, bonds, commodities or insurance and annuity contracts) in the three year period ending on 31 December in the year preceding the year in which its status is being determined or, if shorter, the period in which the entity has been in existence.

Therefore if the majority of a charity’s income is derived from a discretionary managed portfolio of stocks and shares, the charity will be subject to the CRS requirements. As this criterion is effectively re-assessed every year, a charity should check annually whether or not it is subject to the CRS requirements. 

CRS Requirements

A charity that is within the CRS regime is under specific requirements in respect of Account Holders. Account Holders are those who meet the definition of holding an equity interest or a debt interest in the charity who are resident in one or more of the participating jurisdictions. A list of participating jurisdictions is available by clicking here.

The definition of a debt or equity interest depends on the structure of the charity.

Where the charity is a trust structure (so not a company or a Charitable Incorporated Organisation (CIO)) the definition of an equity interest is as follows: an equity interest is held by any person treated as a settlor or beneficiary of all or part of the trust or by any natural person exercising ultimate effective control of it. The settlor is generally the person or people who created the charity in the first instance however it can be a subsequent donor of the charity who specifies how the donation should be used. Beneficiaries are those who receive a grant or other distribution from the charity and are likely to be the most common equity interest holder.

Where the charity is either a company or a CIO, an equity interest is not considered to be held by the members of a company limited by guarantee or the members of a CIO. Importantly unlike trusts the mere receipt of a grant will not make that person an equity interest holder.

The definition of a debt interest is effectively the same regardless of the structure of the charity. A debt interest includes all loans made to a charity whether formal or informal and encompasses a program related investment or social investment which takes the form of a loan. The definition of a debt interest does not include the debts a charity owes to trade creditors. 

In view of the distinction generally those charities which have a trust structure will be the most likely to be subject to the CRS regime. 

A charity subject to the CRS regime must undertake the following:

  1. Due Diligence – A charity must identify and maintain information about the tax residence of all those to whom it has made a grant, and all other Account Holders and establish whether or not they are resident in one or more reportable jurisdictions. Such due diligence can be obtained through self certification signed by the Account Holder. Information collected under the due diligence rules must be maintained for 6 years.
  2. Report – Report to HMRC details for each Account Holder resident in a reportable jurisdiction outside the UK with which the UK has agreed to exchange data.
  3. Notify – Notify each Account Holder to whom the charity is under an obligation to report that they will be reporting them to HMRC and the information may be transferred to the government of another territory.

What information needs to be reported?

A charity that is within the CRS reporting regime will have to report certain information in respect of the debt or equity interest holders in the charity. This includes the name, address and, if an individual, their date of birth together with the value.

Where the beneficiary receives grants, the value will be that paid in the calendar year, or, if paid in instalments, the instalments paid during the calendar year and the amount outstanding at the end of the year for payment in future years. In the case of any individual who exercises ultimate effective control over the trust, the value is the value of their interest but where there is no arrangement in place entitling the person to a financial interest, the reportable value will be nil.


The first CRS Report for the year ended 31 December 2016 should be filed with HMRC online by 31 May 2017. However as this is a new regime HMRC have stated that their approach to compliance will be a soft landing and HMRC “will not seek to apply penalties where charities have made efforts to carry out due diligence requirements and report accurately. However, we will not rule out the imposition of penalties where charities have failed to engage with the requirements.” A charity must register with HMRC prior to being able to file a Report.

Notification to each Account Holder must be made by 31 January in the calendar year following the first year in which the account becomes a reportable account. This highlights the need to ensure that records are kept up-to-date.


CRS represents an additional level of compliance for charities. The burden of this compliance, however, can be eased by having procedures in place which record the relevant details of those the charity is required to report at the outset. If the compliance becomes too onerous for your charity you may wish to consider changing the structure of your charity to that of a CIO or company which are not so heavily affected by the CRS regime.   

This briefing note has been written by Matthew McCormick. If you have any questions about the note or require advice as to whether or not CRS applies to your charity please contact Matthew or Richard Monkcom.

This note does not constitute legal advice but is intended as general guidance only. It is based on the law in force in May 2017.

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