HM Revenue & Customs (HMRC) invited some of the UK’s financial industry experts, including STEP, to join an overview of the OECD’s current review of the Common Reporting Standard (CRS).
The OECD will launch a consultation later this year, but has requested early input from industry experts on the improvements and changes that they would like to see. The purpose of the review is to enhance the general efficiency and operation of the CRS, and especially the quality and usability of its data.
In recent years there has been increasing use of innovative financial products that were not envisaged when the CRS was originally implemented. Some gaps and ambiguities in the legislation have been identified, and the OECD believes the time is now right to review and consolidate it. HMRC intends to consult the crypto-asset industry on technical changes and improvements and e-money industry experts, an area which was previously excluded, but some countries have called for it to be included in order to reach a single and consistent view.
HMRC also discussed some trust related issues for consultation, including:
Rules on reporting of joint accounts
While each joint account holder is required to report specific information, the schema does not recognise the number of account holders. HMRC suggests developing an indicator or flag to identify each individual account holder.
Controlling persons of passive non-financial entities (NFEs)
The schema is currently unable to assess the identity of the controlling person (ie settlor, protector) making the data less useful for tax risk purposes. HMRC suggests introducing a mandatory field to specify the role of the controlling person.
Account holder where a trust is a financial institution (FI)
HMRC suggests the schema should be able to identify the type of equity interest the account holder has for risk assessment purposes.
Other trust-related issues that will be addressed in more detail include:
- the treatment of reporting in relation to trustees, protectors and controllers;
- inconsistent value reporting on the value of trust accounts;
- reporting of trust loans as payments and potential avoidance issues;
- consistency over reporting of issues on protectors and other ‘controllers’ who have no financial interests in the trust;
- cross-over issues on reporting controllers – AML principles and FATF guidance;
- reporting on ownership of corporate trustees in the context of controlling persons/equity interest holders;
- relevance of cash as an asset in the context of classifying entities, particularly in the financial institution/passive NFE distinction.
HMRC has confirmed that it will form a focus group to look at the CRS and specific trust aspects, and we will keep members updated as the consultation progresses. In the meantime if members have any additional trust-related feedback please email the policy team at [email protected] by 1 February 2021.
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