HMRC has clarified and completed its guidance for charities on the Common Reporting Standard, including updates on the implications of the guidance on human rights.
The updates have been welcomed by umbrella bodies, but the Association of Charitable Foundations (ACF) criticised the “abject failure” of HMRC for not engaging with the charity sector at an earlier stage.
The Common Reporting Standard (CRS), which asks financial institutions to report on account holders as a method of preventing tax evasion, came into force at the beginning of 2016, amid concerns that it would place a significant administrative burden on grant-making charities in particular.
The updates from HMRC have included technical clarification around aspects such as unit trusts and common deposit trusts, with the most substantial update being the introduction of a new chapter on how the guidance impact on charities and their human rights, which went live this morning.
This chapter includes information on the protection on human rights grounds, including on when safeguards are already in place. It also includes details on how information can be redacted when there is a threat to human rights, and information on how to apply for a redaction.
The updates follow concerns raised by sector umbrella bodies including ACF, Charity Finance Group (CFG) and the Ariadne Network of human rights funders.
The concerns centred on a lack of clarity about who would be affected and in what way, the burdensome bureaucratic requirements, and the potential human rights implications.
ACF sought specific clarity about the implications for endowed foundations, many of which face onerous due diligence and reporting duties similar to those expected of banks and investment houses.
‘Abject failure’ of HMRC
Carol Mack, who took over as chief executive of ACF at the end of 2016, said of the process: “ACF welcomes the completion of this guidance, which follows a long and intensive period of engagement from us and our partners.
“Thankfully, ACF was able to highlight the implications of CRS for endowed foundations by drawing on our knowledge of, and connection to, our varied and supportive membership.
“However, it is extremely disappointing that HMRC did not engage at an early stage with the charity sector – the abject failure to do this has created months of unnecessary anxiety and uncertainty.
“While we fully support the aim of combatting tax evasion, we deeply question the need to inflict this degree of red tape on funders and will be monitoring implementation closely in the coming months and years.”
ACF has worked alongside CFG construct a series of materials designed to help charities to understand and fulfill their obligations. They can be found here.
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