Informing clients of CRS reporting

George HodgsonAt one of the regular meetings we had with HMRC, there was a short presentation from the Offshore Evasion strategy team. They are keen to get the message out to taxpayers that automatic exchange of information in the shape of the Common Reporting Standard will be coming in relatively soon, with the first exchange of information between tax authorities due in 2017. At that point tax authorities will start to get a flood of very detailed information on anyone with financial assets overseas. They would much prefer that taxpayers in this situation take action now to regularise their affairs via the disclosure options that are available rather than see a whole raft of taxpayers being faced with enforcement action after tax information exchange has commenced.

Many practitioners are probably currently focussed on ensuring FATCA reporting goes smoothly and have not yet given too much thought to the arrival of the CRS, but the message from HMRC is a timely one and highlights the benefits of ensuring that clients are fully aware of the need to regularise their tax affairs if need be, ahead of the new international reporting arrangements coming into force.

George Hodgson is Deputy Chief Executive of STEP.

The European FATCA

The EU Commission held a full day meeting with experts to explain its plans for developing full multilateral automatic exchange of tax information across the EU. Of, course the EU already has the Savings Tax Directive, but that only covers interest income, and plans to extend it have long been held up by objections from Belgium, Luxembourg and Austria that they were not prepared to agree to the extension until certain issues, like automatic information exchange with Switzerland and the treatment of ‘Anglo-Saxon’ trusts had been resolved.

The EU has opened discussion with Switzerland, and we were in Brussels a couple of weeks ago making a major presentation on trusts (to all 27 Member States, including Belgium, Luxembourg and Austria), so the Savings Tax Directive project is inching forward. In the meanwhile, however, it is clear that politically the EU is keen to develop its own version of FATCA as quickly as possible. Its chosen way of doing this is to extend the Administrative Co-operation Directive (DAC, another acronym for the lexicon!) to cover all payments and account values by 2015.

The Commission objection to FATCA is that it is US-centric and not really suitable for multi-lateral rather than bi-lateral information exchange. All of which is true and the reason why the G-8 has asked the OECD to work on its own model for multi-lateral automatic information exchange.

As all the experts in Brussels (including STEP) therefore pointed out, the result is that potentially over the next 2 years the industry will have to work on implementing 3 different tax information exchange systems at once – FATCA, DAC and whatever the OECD comes up with – each basically designed to do the same thing but each doing it slightly differently. This is clearly absurd, but it will be interesting to see who blinks first.

George Hodgson, STEP Deputy Chief Executive