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HMRC internal manual

International Exchange of Information Manual

HM Revenue & Customs
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Background: AEOI Regimes

Automatic Exchange of Financial Account Information

Globalisation of the financial sector now makes it much easier for individuals and entities to hold money and assets outside of their jurisdiction of tax residence. While the great majority comply with their tax obligations there are some who will use the availability of offshore financial structures to evade tax.

Automatic exchange of financial account information is about improving transparency in the fight against tax evasion and in so doing protecting the integrity of the tax systems of the participating jurisdictions. The UK is party to a number of international agreements designed to provide tax administrations with details of financial accounts and assets, owned by individuals and entities that are resident for tax purposes in their jurisdiction, but which are held by financial institutions in the other territory.

For this to work the UK Government has introduced legislation that imposes obligations on the UK financial sector to review and collect details of accounts held by persons that are tax resident elsewhere and report this to HMRC for onward transmission under the exchange of information articles in the various treaties and conventions to which the UK is party. In return, those jurisdictions supply HMRC with similar information on UK tax resident individuals and entities holding accounts with their Financial Institutions.

The UK now has legislation in place for automatic exchange of financial account information under four different regimes:

  1. The United States Foreign Account Tax Compliance Act – FATCA [see IEIM400040 ]
  2. The Crown Dependencies and Gibraltar Regulations – CDOT [see IEIM400060]
  3. The Common Reporting Standard developed by the OECD – CRS [see IEIM400080]
  4. The EU Directive on Administrative Cooperation in Tax Matters – DAC [see IEIM400100]

The UK is also party to a number of non-reciprocal automatic exchange of information agreements under which the UK receives information but is not obliged to report to the other jurisdictions.

Going forward it is expected that, with the exception of the FATCA agreement, all of the UK’s obligations in this area will be under the CRS or the DAC as the Crown Dependencies and Overseas territories have signed Competent Authority Agreements with the UK to exchange information under those agreements from 2017 meaning that reporting under CDOT will be relatively short-lived. All the regimes have significant common requirements, this guidance manual will therefore concentrate on the requirements of the DAC and the CRS and highlight the differences that apply under the other two regimes.

HMRC is responsible for ensuring that UK Financial Institutions comply with their obligations under the relevant legislation. This guidance is intended to provide HMRC staff with an understanding of the requirements that UK Financial Institutions must fulfil to comply with those obligations and to aid businesses that may have responsibilities to review, collect and report information under the regulations. It is also intended as a reference source for Financial Institutions and tax professionals for use alongside the Commentaries to the CRS.