12 September 2021
Automatic Exchange of Information
The UK has made agreements with other countries to exchange information between tax authorities as a bid to stop tax avoidance and evasion. The information which is exchanged relates to investments and financial accounts. Financial institutions in the UK such as banks and building societies, insurance and investment companies will provide information on non-UK residents to HMRC through its online system, which will then be shared with the appropriate countries.
The Automatic Exchange of Information (AEOI) system must be used, so any financial institution that has not registered should do so immediately. Returns should be filed for each calendar year ending 31st December by the following 31st May. The list of territories with which AEOI agreements are held is regularly updated and shown on the HMRC website, financial institutions are advised to keep up to date with changes and adjust their data collection accordingly.
How to Report.
Once logged into the portal, select 'Create an AEOI return online'. You can then either search for a financial institution or see a list of the financial institutions you've registered. The list would only be your name if you are a financial institution reporting on your own behalf. You should then select 'Create an AEOI return' for the financial institution you are reporting for.
You will then be asked five questions about the reporting period. It is important to provide details of the elections being made and the applicable regime, e.g. FATCA. If the return is mixed and includes accounts which are under FATCA and CRS, the question should be answered for the elected regime.
The questions are as follows:
1. Are you electing not to report cash value insurance contracts or annuity contracts described in section III A of the CRS?
2. Are you making an election to treat dormant accounts as not being reportable accounts?
3. If you're reporting specified US persons, are you making an election to use alternative due-diligence procedures taken from US Treasury regulations?
4. Are you making an election to use thresholds in your due-diligence process?
5. Are you submitting any nil returns?
For each question, you will have the option of answering either yes or no. There may be a not applicable option for some questions. In order to complete the return accurately, the HMRC website gives detailed guidance on how to answer each question, which is worth reviewing before every return. Since returns are made annually and updates to procedures may have been made since you last made a return, re-familiarising yourself with the processes is always wise.
After answering these five questions, there are options to change the details of the financial institution for which you are reporting, if any of these are incorrect. You can also create your return and/or delete a draft return from this part of the system. Once you have created your return, you should then enter the details for each reportable account. The information manual explains what a reportable account is.
When selecting your account holder type, there are six options shown, although only five are now selectable. These are:
- Reportable Person
- Reportable Entity
- Passive Non-Financial Entity with controlling persons
- Owner documented financial institution (FATCA only)
- Passive non-financial entity
For each account holder, you must provide a tax identification number if held, along with their account number. If there is no account number, then an alternative reference should be provided so that you are able to identify the account in future. You will be asked whether the account is undocumented or dormant and you will also be asked about accounts which have closed during the period. Once you have assigned an account type and provided any additional information relevant to the type selected, your AEOI return is ready for submission.