By Adam Thompson
This means that if you are a tax resident in the UK and have bank accounts in Spain, the Spanish authorities will automatically pass details of those accounts to the UK tax authorities.
As a result, there has already been an increased level of co-operation between the tax authorities of adopting countries.
What Is The CRS?
The only notable change from the old system is that the information will now be automatically exchanged. This now means that HMRC will no longer need to contact its Spanish counterpart to request information about an individual. The Spanish authorities will instead provide to HMRC each year a list of all UK tax resident individual’s financial assets in Spain – along with any other individual who has told their Spanish financial institution that they are tax resident in the UK.
What Is Going To Happen?
Expats are often contacted by their financial institutions requesting confirmation of where they live for tax purposes. This is the first part of CRS, and enables financial institutions to provide the tax authorities in their country with a list of clients by country of residence.
The tax authorities will then pass that information to the relevant tax authorities by reference to an individual’s country of tax residence.
However, the first exchange of information will not be instantaneous. For countries adopting from January 2016, the first exchange of information will take place by the end of September 2017. This is expected to be the relevant information for the 2016 calendar year.
This probably leads to the question ‘what information will be passed?’ and the answer is a substantial amount. The list includes: name; address; date of birth; bank account number; bank account balance; details of income and/or sales from that account; and your tax identification number.
Who Has Signed Up?
So far 97 countries have signalled their intention to join the CRS, and 58 have agreed to be early adopters from January 2016.
The most notable inclusions are the EU states, the UK crown dependencies (IOM, Jersey, Guernsey), the UK’s overseas territories (e.g. Anguilla, Bermuda, BVI. Cayman; Gibraltar), Lichtenstein and most of Eastern Europe. However the most notable exception is the USA.
Do I Need To Worry?
The simple answer is that if all income has been declared officially and additional gains have been stated to the relevant tax authorities then, from a tax perspective, no.
There are of course moral questions and your valid concerns over your right to secrecy – but that is not something that is likely to change.
If, however, not all income has been properly declared, it may be sensible to do so voluntarily before it is done on your behalf. The penalties are far more lenient for voluntary disclosure – even with all of the UK disclosure facilities now being closed.
Adam Thompson is Tax Manager at The Fry Group