Technical Corner: Common Reporting Standard and Filing Issues
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This month’s technical corner article comes from Emily Deane TEP, STEP Technical Counsel.
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STEP sits on HMRC’s Common Reporting Standard (CRS) stakeholder working group which has produced some helpful tips in relation to CRS reporting, specifically where financial institutions (FIs) are commonly making reporting and filing errors.
- FIs are wrongly reporting accounts as ‘undocumented’ on the basis that a self-certification requested from an account holder has not been completed which has led to numerous accounts being erroneously reported with a GB resident country code. The definition of an undocumented account can be found at IEIM403100.
- The FI reports accounts where the account holder is not resident in a reportable jurisdiction. Individuals who are not resident in a reportable jurisdiction (see IEIM402340) should not be reported. Some jurisdictions which have signed up to CRS are non-reciprocal, and some which have signed up are not yet ready to receive exchanges.
- The FI reports accounts that are excluded accounts and therefore non-reportable, such as registered pension schemes. A full list of excluded accounts can be found at IEIM401720.
- The FI reports persons which are not reportable persons under CRS, corporations with regularly traded stock and related entities are not reportable account holders, nor are governmental entities, international organisations, central banks or FIs. A list of exemptions to the term ‘Specified U.S. Person’ under FATCA can be found in Article 1 (gg) of the UK-US Inter-governmental Agreement (IGA).
- The FI reports joint individual accounts as entity accounts. A jointly held individual account is not an entity account and the account information to be exchanged can be found at IEIM402140. However, partnerships, including general partnerships, are treated as entities, irrespective of their legal form (see IEIM400860).
- The FI provides the city only address instead of the full address which falls short of the CRS and FATCA requirements. You must provide the full address. Section I subparagraph A(1) of the Common Reporting Standard (page 29) states that each Reporting Financial Institution must report the address of any Reportable Person.
- Reports have shown both date of birth (DOB) and tax identification number (TIN) missing. For CRS, both the DOB and TIN should be reported if held. For FATCA, the DOB should be reported if a US TIN is not held for a ‘Pre-existing Individual Account’ or ‘Controlling Person’. If a valid DOB is not held, then the DOB field should be left blank.
- If the FI decides to submit a new submission to correct the data within the original return, a ‘VOID’ file must be submitted to cleanse the system of the previously provided data to avoid duplication and potentially exchange with overseas tax jurisdictions.
- FIs are not able to view previous returns and will need to re-register if the Automatic Exchange of Information (AEOI) portal login details have been misplaced due to staff changes. AEOI portal login details should be held securely and only by those with a requirement to know. To prevent these details being misplaced the FI should ensure that there is an appropriate procedure to maintain access to the portal. A pseudo email account might be an appropriate solution providing the FI has robust security and data protection safeguards in place.
- Maintain the ‘Point of Contact’ (PoC) on the registration/filing portal. The PoC is used by HMRC for annual mailshots, automatic messages on filing and follow up queries, so failure to keep an up to date PoC can lead to failure to receive such messages.
- File in good time if possible. The deadline for filing is 31st May. Filing submissions sufficiently in advance of the 31st May deadline allows FIs sufficient time to deal with any unexpected issues such as missing information or inaccurate XML schema that might lead to the submission being rejected.
- The AEOI enquiry helpline is for FIs only. HMRC urges users not to share details of the AEOI enquiry helpline with other account holders which inundates the AEOI filing team and prevents HMRC from being able to assist FIs with their reporting obligations.
The CRS can be viewed on the OECD website at: http://www.oecd.org/ctp/exchange-of-taxinformation/standard-for-automatic-exchange-of-financial-account-information-for-tax-matters9789264216525-en.htm
Emily Deane TEP, Technical Counsel