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HMRC internal manual

International Exchange of Information Manual

Background: Status of Guidance

The CRS is imposed in Europe via the European Directive on Administrative Cooperation (DAC), as a result it is DAC which governs the obligations imposed on Reporting Financial Institutions in the UK. The UK guidance on CRS cannot extend or restrict the scope of CRS as implemented by the DAC as to do so would go beyond what HMRC is permitted to do.

All Reporting Financial Institutions are required to carry out the due diligence processes for identifying Reportable Accounts as set out in the DAC. The DAC draws heavily on the CRS, in that applying the due diligence processes in the DAC will allow a Reporting Financial Institution to identify Reportable Accounts for Account Holders that are resident in CRS Reportable Jurisdictions outside of the EU. This means that for UK reporting purposes it is the application of the DAC that takes precedence over the CRS.

Clause 13 of the DAC states:-

*“In implementing this Directive, Member States should use the Commentaries on the Model Competent Authority Agreement and Common Reporting Standard, developed by the OECD, as a source of illustration or interpretation and in order to ensure consistency in application across Member States. Union action in this area should continue to take particular account of future developments at OECD level.” *

It follows that should the Courts need to interpret how any element of the DAC applies they will turn to the Commentaries on the Model Competent Authority Agreement and Common Reporting Standard as the primary source of interpretation. This means that if Financial Institutions have doubts about how any element of the DAC applies their first point of reference for guidance should be to the CRS Commentaries. The UK Guidance is secondary to this and assists with using the Commentaries by summarising and bringing together some of the main issues and to deal with any UK specific areas where the CRS allows for a degree of optionality as well as highlighting differences in approach between the DAC, FATCA and the Crown Dependencies and Overseas Territories reporting regimes.

Additional guidance can be found on the OECD Automatic Exchange Portal, including the CRS    Implementation Handbook, which is a practical guide for government officials and financial institutions, and a list of CRS-related Frequently Asked Questions (FAQs).