HMRC has updated its guidance on the financial assets test for charities under the Common Reporting Standard (CRS). HMRC has amended its definition of Gross Income, with Passive Income no longer to be included for the 50 per cent financial assets test.

Charities should therefore not include net capital gains on disposals of financial asset investments held as fixed assets when calculating their Gross Income. However, if any investments are held as current assets, the gains on trading should still be included.

Charities which have calculated their Gross Income based on earlier guidance may therefore have overstated the proportion of Gross Income attributable to their financial assets. If this change results in the amount attributable to investing in financial assets falling below 50 per cent of a charity’s Gross Income, this may remove the charity’s CRS reporting requirements.

For more information on the Common Reporting Standard, click here.