Our ‘Technical Corner’ brings you information that will help you to continue to grow and develop in your career.
This month’s technical corner article comes from Emily Deane TEP, STEP Technical Counsel.
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We will publish the questions and answers where appropriate to continue to help our Wills and Probate community.
Practitioners have been very receptive to the news that HM Revenue & Customs (HMRC) has invited some of the UK’s financial experts to participate in early discussions around the OECD’s review of the Common Reporting Standard (CRS). The OECD will launch a formal consultation later this year, but has requested initial input from industry experts on the improvements and changes that they would like to see. The purpose of the review is to enhance the general efficiency and operation of the CRS, and especially the quality and usability of its data.
In recent years there has been increasing use of innovative financial products that were not envisaged when the CRS was originally implemented. Some gaps and ambiguities in the legislation have been identified, and the OECD believes the time is now right to review and consolidate it. HMRC intends to consult the crypto-asset industry on technical changes and improvements and e-money industry experts, an area which was previously excluded, but some countries have called for it to be included in order to reach a single and consistent view.
HMRC has invited industry feedback on trust related reporting issues such as:
- Rules on reporting of joint accounts
While each joint account holder is required to report specific information, the schema does not recognise the number of account holders. HMRC suggests developing an indicator or flag to identify each individual account holder.
- Controlling persons of passive non-financial entities (NFEs)
The schema is currently unable to assess the identity of the controlling person (ie settlor, protector) making the data less useful for tax risk purposes. HMRC suggests introducing a mandatory field to specify the role of the controlling person.
- Account holder where a trust is a financial institution (FI)
HMRC suggests the schema should be able to identify the type of equity interest the account holder has for risk assessment purposes.
HMRC has confirmed that it will form a focus group to look at nd other trust-related issues that will be addressed in more detail including:
- the treatment of reporting in relation to trustees, protectors and controllers;
- inconsistent/unclear reporting on the value of trust accounts;
- reporting of trust loans as payments and potential avoidance issues;
- reporting issues in relation to protectors and other ‘controllers’ who have no financial interests in the trust;
- reporting on ownership of corporate trustees in the context of controlling persons/equity interest holders;
- relevance of cash as an asset in the context of classifying entities, particularly in the financial institution/passive NFE distinction.
We understand that HMRC’s intention is to consolidate the FAQs into an updated version of the guidance once a full consultation has been undertaken.