The deadline for submitting Automatic Exchange of Information (AEOI) returns (under the Common Reporting Standard rules) for the year ended 31 December 2016, was 31 May 2017.
CTG has worked with charitable trusts to help them understand whether they need to undertake these reporting requirements and has encouraged feedback from members on their experiences with this first submission.
One charity representative has told us:
“We have just successfully submitted a CRS return online on behalf of our organisation, which administers a number of different charities. Across the organisation, we have probably invested about 20 work days into this. After review, we had 16 Charities that were identified as Financial Institutions. After due diligence was carried out, only 1 of these had made payments to a reportable jurisdiction. This was a single donation payment of 1,220 euros to a charity based in a reportable jurisdiction – so all of this effort for about £1,000 of grant funding.
“Overall, we found HMRC’s Offshore Data Exchange Team (ODET) to be very helpful and supportive. They were available to talk us through what were probably basic questions at any time, and always came back promptly to emails. Their responses were jargon free, and were sympathetic to how matters related to charities.
“The HMRC online team were not helpful at all with CRS. We had to call them when there were problems with my online account set-up. They insisted that we had to provide a PAYE number to them, to enable them to help us, and were unable to understand when we explained that my tiny charity that had to report under CRS did not have one of these. They also insisted that I provide a FATCA number, and were not aware that charities had been exempt from this. My only solution was to talk with the ODET office – who were very frustrated to hear how the HMRC Online office were responding. It was as a result of their help behind the scenes that we were able to sort out the issue with my online account.
“In making the submission, we had to phone the ODET office 3 times, as the language used within the online submission process was not relevant to charities so not clear to me how to complete. At each time, the staff were very helpful, and talked me through how to respond. They were clearly well versed as to how to assist charities, and were able to make sensible suggestions.
- This has taken up an inordinate amount of staff resource
- It has caused anger within some of the charities we administer, as they did not wish to approach grantees who had received small amounts to confirm their tax status
- Despite the additional guidance made available for charities, it was not easy to relate processes to charitable activities
- HMRC online staff had little idea how to support charities with this process
- Staff at the ODET office in Cardiff were brilliant.
“We are pleased to have met the deadline and now feel better prepared for next year, but think improvements could be made to the guidance for charities and further consideration should be given to whether the additional administrative burden caused by the due diligence process is required. The introduction of a de-minimis value would be very useful – even if just set at £100.”
While another charity has commented:
“Following a late night submission I am sorry to report that the whole process was more complex than anticipated, compounded by the fact that the submission website was suffering technical difficulties on the afternoon of deadline day.
“My first observation on the process is that there is no indication on HMRC’s website as to what is actually needed to complete the online return. The first chance of seeing what is needed is when you start to enter actual live details. Providing this information on the website would help to save a lot of time in future.
“The return also required a lot more data than we were led to believe from earlier discussions with the officials responsible for CRS which meant that I had not got all the information required in one place. For example, it had never been made clear in what currency you would have to report grant payments and balances so it varies as to how we have offered the grant (or does it?). Applying the $250k threshold for existing accounts to multiple currencies was also a nightmare as a result. Furthermore, questions are obviously aimed at the likes of banks holding client accounts with a choice of drop down answers that are irrelevant to grant making charities.
“Following the due diligence process and having filtered through over 1,000 grants we determined that we had 45 grant holders to enter -as this had to be done one at a time it took about 4 hours to complete.
“We have not yet worked out the total time to complete the submission, but it has involved:
- 3 people from our IT department to set up systems to interrogate different databases.
- 3 people drafting appropriate letters to go out to different classes of grantees. Approximately 600 were sent out, each of which had to be approved by the grant handler.
- Finance and grant management departments having to be briefed on what was going on and how to respond to queries
- Recording the grantee responses to our letters (none of our databases are designed to record this so it has gone on a temporary worksheet until we pay someone to redesign the data capture process)
- Sense checking responses and sending further requests when respondents had not identified which type of entity they were. Invariably it is not our contact (the grant recipient) in an organisation that can answer the questions we are asking about their organisation’s entity type as defined for CRS purposes.
“It would be no exaggeration to estimate the time to date in man-months and this doesn’t include the time and costs still to be incurred in redesigning our database systems. Overall not the best use of charity time and resources.”
We would welcome feedback from you on whether you have been able to meet the 31 May 2017 deadline, and, what your experience has been of the due diligence and reporting process. Please send any comments to [email protected]. This feedback will then be shared with HMRC on an anonymous basis.
HMRC has indicated that if reasonable steps have and are being made by charities to comply with the CRS filing requirements, but it has not be possible to make the deadline, these charities should contact HMRC. We have been told that HMRC will apply a light touch approach where charities have made efforts to carry out due diligence requirements and report accurately, but this approach is contingent on early communication with HMRC. If a charity is still in any way uncertain as to its status in relation to the CRS, we would encourage them to seek professional advice and/or HMRC to make certain of their situation and any reporting requirements.
The Association of Charitable Foundations has compiled a useful summary of the steps affected charitable trusts need to take (charitable companies are not required to report as their grant recipients are not regarded as “Account holders”). HMRC’s detailed guidance for charities can be read here. Alana Petraske’s helpful blog outlining her top 10 tips for charities affected by CRS can be read here.