United Kingdom

This report analyses the implementation of the AEOI Standard in the United Kingdom with respect to the requirements of the AEOI Terms of Reference. It assesses both the legal frameworks put in place to implement the AEOI Standard and the effectiveness of the implementation of the AEOI Standard in practice.

The methodology used for the peer reviews and that therefore underpins this report is outlined in Chapter 2.

Overall findings

AEOI legal framework

The United Kingdom’s legal framework implementing the AEOI Standard is in place and is consistent with the requirements of the AEOI Terms of Reference. This includes the United Kingdom’s domestic legislative framework requiring Reporting Financial Institutions to conduct the due diligence and reporting procedures (CR1) and its international legal framework to exchange the information with all of the United Kingdom’s Interested Appropriate Partners (CR2).

Overall determination on the legal framework: In Place

Effectiveness of AEOI in practice

The United Kingdom’s implementation of the AEOI Standard is on track with respect to the requirements of the AEOI Terms of Reference to ensure the effectiveness of the AEOI Standard in practice. This includes ensuring Reporting Financial Institutions correctly conduct the due diligence and reporting procedures (CR1) and exchanging the information in an effective and timely manner (CR2).

Overall rating in relation to the effectiveness in practice: On Track

General context

The United Kingdom commenced exchanges under the AEOI Standard in 2017.

In order to provide for Reporting Financial Institutions to collect and report the information to be exchanged, the United Kingdom:

• enacted Section 222 of the Finance Act 2013;

• introduced the International Tax Compliance Regulations 2015 as amended by Statutory Instruments 1839 of 2015, 899 of 2016, 598 of 2017, 490 of 2018, 881 of 2019 and 438 of 2020; and

• issued further guidance, which is not legally binding.

Under this framework Reporting Financial Institutions were required to commence the due diligence procedures in relation to New Accounts from 1 January 2016. With respect to Preexisting Accounts, Reporting Financial Institutions were required to complete the due diligence procedures on High Value Individual Accounts by 31 December 2016 and on Lower Value Individual Accounts and Entity Accounts by 31 December 2017.

Following the initial Global Forum peer review, the United Kingdom made various amendments to its legislative framework to address issues identified, the last of which was effective from 13 May 2020.

With respect to the exchange of information under the AEOI Standard, the United Kingdom:

• is a Party to the Convention on Mutual Administrative Assistance in Tax Matters and activated the associated CRS Multilateral Competent Authority Agreement in time for exchanges in 2017;

• has in place European Directive 2011/16/EU on Administrative Cooperation in the Field of Taxation as amended by Directive 2014/107/EU;

• has in place European Union agreements with five European third countries1; and

• put in place 12 bilateral agreements.2

Table 1 sets out the number of Financial Institutions in the United Kingdom that reported information on Financial Accounts in 2021 as defined in the AEOI Standard (essentially, because they maintained Financial Accounts for Account Holders, or that were related to Controlling Persons, resident in a Reportable Jurisdiction). It also sets out the number of Financial Accounts that they reported in 2021. In this regard, it should be noted that the United Kingdom requires the reporting of Financial Accounts based on a prescribed list of exchange partners and some accounts may be required to be reported more than once (e.g. jointly held accounts or accounts with multiple related Controlling Persons), which is reflected in the figures below. These figures provide key contextual information to the development and implementation of the United Kingdom’s administrative compliance strategy, which is analysed in the subsequent sections of this report.

Table 1. Number of Financial Institutions reporting and Financial Accounts reported
	Number
Financial Institutions reporting Financial Accounts in 2021	4 623
Financial Accounts reported in 2021	8 185 190

Table 2 sets out the number of exchange partners to which information was successfully sent by the United Kingdom in the past few years (including where the necessary frameworks were in place containing an obligation on Reporting Financial Institutions to report information but no relevant Reportable Accounts were identified). These figures provide key contextual information in relation to the United Kingdom’s exchanges in practice, which is also analysed in subsequent sections of this report.

Table 2. Number of exchange partners to which information was successfully sent
	2018	2019	2020	2021
Number of exchange partners to which information was successfully sent	62	68	70	72

In order to provide for the effective implementation of the AEOI Standard ,in the United Kingdom:

• Her Majesty’s Revenue and Customs (HMRC, the tax authority), has the responsibility to ensure the effective implementation of the due diligence and reporting obligations by Reporting Financial Institutions and for exchanging the information with the United Kingdom’s exchange partners;

• technical solutions necessary to receive and validate the information reported by Reporting Financial Institutions were put in place by HMRC where a dedicated reporting portal has been set up to enable Financial Institutions to submit AEOI reports by manual entry or by uploading an XML file; and

• the Common Transmission System (CTS) is used for the exchange of the information, along with the associated file preparation and encryption requirements.

It should be noted that the review of the United Kingdom’s legal frameworks implementing the AEOI Standard concluded with the determination that the United Kingdom’s domestic and international legal frameworks are In Place. This has been taken into account when reviewing the effectiveness of the United Kingdom’s implementation of the AEOI Standard in practice.

Findings and conclusions on the legal frameworks

The detailed findings and conclusions on the AEOI legal frameworks for the United Kingdom are below, organised per Core Requirement (CR) and then per sub-requirement (SR) as extracted from the AEOI Terms of Reference (see Annex C).

CR1 Domestic legal framework: Jurisdictions should have a domestic legislative framework in place that requires all Reporting Financial Institutions to conduct the due diligence and reporting procedures in the CRS, and that provides for the effective implementation of the CRS as set out therein.

Determination: In Place

The United Kingdom’s domestic legislative framework is in place and contains all of the key aspects of the CRS and its Commentary requiring Reporting Financial Institutions to conduct the due diligence and reporting procedures (SRs 1.1 – 1.3). It also provides for a framework to enforce the requirements (SR 1.4).

SR 1.1 Jurisdictions should define the scope of Reporting Financial Institutions consistently with the CRS.

Findings:

The United Kingdom has defined the scope of Reporting Financial Institutions in its domestic legislative framework in accordance with the CRS and its Commentary.

Recommendations:

No recommendations made.

SR 1.2 Jurisdictions should define the scope of Financial Accounts and Reportable Accounts consistently with the CRS and incorporate the due diligence procedures to identify them.

Findings:

The United Kingdom has defined the scope of the Financial Accounts that are required to be reported in its domestic legislative framework and incorporated the due diligence procedures that must be applied to identify them in accordance with the CRS and its Commentary.

Recommendations:

No recommendations made.

SR 1.3 Jurisdictions should incorporate the reporting requirements contained in Section I of the CRS into their domestic legislative framework.

Findings:

The United Kingdom has incorporated the reporting requirements in its domestic legislative framework in accordance with the CRS and its Commentary.

Recommendations:

No recommendations made.

SR 1.4 Jurisdictions should have a legislative framework in place that allows for the enforcement of the requirements of the CRS in practice.

Findings:

The United Kingdom has a legislative framework in place to enforce the requirements in accordance with the CRS and its Commentary.

Recommendations:

No recommendations made.

CR2 International legal framework: Jurisdictions should have exchange relationships in effect with all Interested Appropriate Partners as committed to and that provide for the exchange of information in accordance with the Model CAA.

Determination: In Place

The United Kingdom’s international legal framework to exchange the information is in place, is consistent with the Model CAA and its Commentary and provides for exchange with all of the United Kingdom’s Interested Appropriate Partners (i.e. all jurisdictions that are interested in receiving information from the United Kingdom and that meet the required standard in relation to confidentiality and data safeguards) (SRs 2.1 – 2.3).

SR 2.1 Jurisdictions should have exchange agreements in effect with all Interested Appropriate Partners that permit the automatic exchange of CRS information.

Findings:

The United Kingdom has exchange agreements that permit the automatic exchange of CRS information in effect with all its Interested Appropriate Partners.

Recommendations:

No recommendations made.

SR 2.2 Such an exchange agreement should be put in place without undue delay, following the receipt of an expression of interest from an Interested Appropriate Partner.

Findings:

The United Kingdom put in place its exchange agreements without undue delay.

Recommendations:

No recommendations made.

SR 2.3 Jurisdictions should ensure that the exchange agreements in effect provide for the exchange of information in accordance with the requirements of the Model CAA.

Findings:

The United Kingdom’s exchange agreements provide for the exchange of information in accordance with the requirements of the Model CAA.

Recommendations:

No recommendations made.

Assessed jurisdiction’s comments on the assessment of its legal frameworks

No comments made.

Findings and conclusions in relation to effectiveness in practice

The detailed findings and conclusions in relation to effectiveness in practice of AEOI for the United Kingdom are below, organised per Core Requirement (CR) and then per sub-requirement (SR) as extracted from the AEOI Terms of Reference (see Annex C).

CR1 Effectiveness in practice: Jurisdictions should ensure that in practice Reporting Financial Institutions correctly implement the due diligence and reporting procedures, which includes a requirement for jurisdictions to have in place an administrative framework to ensure the effective implementation of the CRS.

Rating: On Track

The United Kingdom’s implementation of the AEOI Standard is on track with respect to ensuring that Reporting Financial Institutions are correctly conducting the due diligence and reporting procedures and are therefore reporting complete and accurate information. This includes ensuring effectiveness in a domestic context, such as through having an effective administrative compliance framework and related procedures (SR 1.5), and collaborating with exchange partners to ensure effectiveness (SR 1.6). The United Kingdom is encouraged to continue its implementation process to ensure its ongoing effectiveness.

SR 1.5 Jurisdictions should ensure that in practice Reporting Financial Institutions identify the Financial Accounts they maintain, identify the Reportable Accounts among those Financial Accounts, as well as their Account Holders, and where relevant Controlling Persons, by correctly conducting the due diligence procedures and collect and report the required information with respect to each Reportable Account. This includes having in place:

• an effective administrative compliance framework to ensure the effective implementation of, and compliance with, the CRS. This framework should:

  • be based on a strategy that facilitates compliance by Reporting Financial Institutions and which is informed by a risk assessment in respect of the effective implementation of the CRS that takes into account relevant information sources (including third party sources);

  • include procedures to ensure that Financial Institutions correctly apply the definitions of Reporting Financial Institutions and Non-Reporting Financial Institutions;

  • include procedures to periodically verify Reporting Financial Institutions’ compliance, conducted by authorities that have adequate powers with respect to the reviewed Reporting Financial Institutions, with procedures to access the records they maintain; and

• effective procedures to ensure that Financial Institutions, persons or intermediaries do not circumvent the due diligence and reporting procedures;

• effective enforcement mechanisms to address non-compliance by Reporting Financial Institutions;

• strong measures to ensure that valid self-certifications are always obtained for New Accounts;

• effective procedures to ensure that each, or each type of, jurisdiction-specific Non-Reporting Financial Institution and Excluded Account continue to present a low risk of being used to evade tax; and

• effective procedures to follow up with a Reporting Financial Institution when undocumented accounts are reported in order to establish the reasons why such information is being reported.

Findings:

In order to ensure that Reporting Financial Institutions correctly conduct the due diligence and reporting procedures, the United Kingdom implemented all of the requirements in accordance with expectations. The key findings were as follows:

• The United Kingdom implemented an overarching strategy to ensure compliance with the AEOI Standard developed after conducting a risk assessment that took into account a range of relevant information sources, such as the AEOI returns submitted by the Financial Institutions, other information held about the Financial Institutions (from both internal and external sources), including their compliance history, information from Customer Compliance Managers, a Banking Trade Sector adviser, and Audit Specialists who are trained in governance and risk management.

• The United Kingdom’s compliance strategy facilitates compliance through a high level of communication and engagement with Financial Institutions and incorporates a credible approach to enforcement. The United Kingdom intends to keep its compliance strategy and risk assessment under review to ensure its effectiveness on an ongoing basis.

• The United Kingdom has worked effectively to understand its population of Financial Institutions, utilising various relevant information sources, such as the lists of regulated entities, the list of Foreign Financial Institutions for FATCA purposes and the trusts register to identify non-regulated entities that are Financial Institutions for the purpose of the AEOI Standard. The United Kingdom takes action to ensure that Reporting Financial Institutions are classifying themselves correctly under its domestic rules and reporting information as required. The United Kingdom intends to keep its understanding of its Financial Institution population up to date on a routine basis.

• The institution responsible for implementing the United Kingdom’s compliance strategy appears to have the necessary powers and resources to discharge its functions. With respect to resourcing, the United Kingdom has assigned the equivalent of 22 full time staff to monitor and ensure compliance by Reporting Financial Institutions, which have access to IT systems and tools to conduct risk assessments. With respect to the compliance activities, the primary risk identifier is the AEOI returns from Financial Institutions, which are monitored by IT systems and case workers. Checks include reporting a high number of undocumented accounts, reporting of entities as individuals and vice versa, and missing information. Overall, the United Kingdom appears to have effectively implemented an operational plan to verify compliance with the requirements, incorporating appropriate compliance activities.

• It appears that the United Kingdom effectively verifies and enforces the requirements, including through the inspection of records of Reporting Financial Institutions and the application of dissuasive penalties and sanctions for non-compliance. It also appears that effective action is taken to address the circumvention of the requirements, ensure self-certifications are obtained as required and to follow up on undocumented accounts.

• The United Kingdom will also keep its jurisdiction-specific lists of Non-Reporting Financial Institutions and Excluded Accounts under review to ensure they continue to pose a low risk of being used for tax evasion purposes.

Table 3 provides a summary of the specific activities undertaken, or that are planned to be undertaken, in relation to each of the key parts of the framework described above.

Table 3. Activities undertaken
Activity type	Activities undertaken
Communication and outreach	The United Kingdom has carried out substantial communication and outreach activities, such as publishing guidance, holding face-to-face events and webinars for Financial Institutions, regular meetings with stakeholders to provide updates and ongoing assistance through a helpline.
Verifying that Financial Institutions are reporting as required	The United Kingdom has carried out substantial verification activities to ensure that Financial Institutions are reporting as required, such as sending compliance questionnaires and holding remote discussions with Financial Institutions that are considered likely to need to report information. It has identified many Financial Institutions incorrectly not reporting and is following up on these issues with a view to ensuring future compliance.
Verifying whether the information reported is complete and accurate	The United Kingdom has conducted a significant number of desk-based checks to verify whether the information being reported is complete and accurate. Onsite visits were not possible due to the pandemic. The United Kingdom has conducted a significant number of in-depth audits. It accordingly identified many issues, commonly concerning Reportable Accounts for which information was not reported and Reportable Accounts for which information was reported incorrectly. It is following up on these issues with a view to ensuring future compliance.
Enforcement	Following the activities mentioned above, the United Kingdom has imposed a substantial number of penalties and sanctions. It is monitoring the impact of these penalties and sanctions with a view to ensuring future compliance.

In terms of the Financial Account information collected and sent by the United Kingdom, the presence of the dates of birth appeared to be in line with most other jurisdictions, as did the level of undocumented accounts. However, it was found to include a significantly lower proportion of Tax Identification Numbers with respect to the individuals associated with the accounts when compared to most other jurisdictions. Follow-up discussions confirmed that the United Kingdom is aware of these issues and is taking steps to address them. More generally, many of the exchange partners that received a significant number of records from the United Kingdom indicated that they achieved a success rate when matching the information received from the United Kingdom with their taxpayer database that was broadly equivalent to, or better than, what they usually achieve.

Based on these findings it was concluded that the United Kingdom is fully meeting expectations in ensuring that Reporting Financial Institutions correctly conduct the due diligence and reporting procedures, including by having in place the required administrative compliance framework and related procedures. The United Kingdom is therefore encouraged to continue its implementation process accordingly.

Recommendations:

No recommendations made.

SR 1.6 Jurisdictions should collaborate on compliance and enforcement. This requires jurisdictions to:

• use all appropriate measures available under the jurisdiction’s domestic law to address errors or non-compliance notified to the jurisdiction by an exchange partner; and

• have in place effective procedures to notify an exchange partner of errors that may have led to incomplete or incorrect information reporting or non-compliance with the due diligence or reporting procedures by a Reporting Financial Institution in the jurisdiction of the exchange partner.

Findings:

In order to collaborate on compliance and enforcement, it appears that the United Kingdom implemented all of the requirements in relation to issues notified to them (i.e. under Section 4 of the MCAA or equivalent) in accordance with expectations. In particular, the United Kingdom received notifications from three partners and successfully processed them in a timely manner, resolving the issues raised. The United Kingdom also notifies its partners effectively of errors or suspected non-compliance it identifies when utilising the information received.

Figure 1. Notifications received

Based on these findings it was concluded that the United Kingdom is fully meeting expectations in relation to collaborating with its exchange partners to ensure that Reporting Financial Institutions correctly conduct the due diligence and reporting procedures. The United Kingdom is encouraged to continue its implementation process accordingly, to ensure its ongoing effectiveness.

Recommendations:

No recommendations made.

CR2 Effectiveness in practice: Jurisdictions should exchange the information effectively in practice, in a timely manner, including by sorting, preparing, validating and transmitting it in accordance with the AEOI Standard.

Rating: On track

The United Kingdom’s implementation of the AEOI Standard is on track with respect to exchanging the information effectively in practice, including in relation to sorting, preparing and validating the information (SR 2.4), correctly transmitting the information in a timely manner (SRs 2.5 – 2.8) and providing corrections, amendments or additions to the information (SR 2.9). The United Kingdom is encouraged to continue its implementation process accordingly, to ensure its ongoing effectiveness.

SR 2.4 Jurisdictions should sort, prepare and validate the information in accordance with the CRS XML Schema and the associated requirements in the CRS XML Schema User Guide and the File Error and Correction-related validations in the Status Message User Guide (i.e. the 50000 and 80000 range).

Findings:

Feedback from the United Kingdom’s exchange partners did not raise any specific concerns with respect to their ability to process the information received from the United Kingdom and therefore with respect to the United Kingdom’s implementation of these requirements. More generally, one of the United Kingdom’s exchange partners reported rejecting more than 25% of the files received due to the technical requirements not being met. This is broadly in line with the general experience of other jurisdictions. It was noted that the United Kingdom has already successfully addressed the issue.

Based on these findings it was concluded that the United Kingdom is fully meeting expectations in relation to sorting, preparing and validating the information. The United Kingdom is encouraged to continue its implementation process accordingly, to ensure its ongoing effectiveness.

Recommendations:

No recommendations made.

SR 2.5 Jurisdictions should agree and use, with each exchange partner, transmission methods that meet appropriate minimum standards to ensure the confidentiality and integrity of the data throughout the transmission, including its encryption to a minimum secure standard.

Findings:

In order to put in place an agreed transmission method that meets appropriate minimum standards in confidentiality, integrity of the data and encryption for use with each of its exchange partners, the United Kingdom linked to the CTS.

Based on these findings it was concluded that the United Kingdom is fully meeting expectations in relation to agreeing and using appropriate transmission methods with each of its partners. The United Kingdom is encouraged to continue to ensure the ongoing effectiveness of its implementation.

Recommendations:

No recommendations made.

SR 2.6 Jurisdictions should carry out all exchanges annually within nine months of the end of the calendar year to which the information relates.

Findings:

Four exchange partners highlighted delays in the sending of information by the United Kingdom (representing 5% of its partners). This represents a relatively high proportion of exchange partners. It was noted that The United Kingdom successfully addressed all of the issues and sent the information as soon as possible thereafter.

Based on these findings it was concluded that the United Kingdom is fully meeting expectations in relation to exchanging the information in a timely manner. The United Kingdom is encouraged to continue to ensure the ongoing effectiveness of its implementation.

Recommendations:

No recommendations made.

SR 2.7 Jurisdictions should send the information in accordance with the agreed transmission methods and encryption standards.

Findings:

Feedback from the United Kingdom’s exchange partners did not raise any concerns with respect to the United Kingdom’s use of the agreed transmission methods and therefore with the United Kingdom’s implementation of this requirement.

Based on these findings it was concluded that the United Kingdom is fully meeting expectations in relation to sending the information in accordance with the agreed transmission methods and encryption standards. The United Kingdom is encouraged to continue to ensure the ongoing effectiveness of its implementation.

Recommendations:

No recommendations made.

SR 2.8 Jurisdictions should have the systems in place to receive information and, once it has been received, should send a status message to the sending jurisdictions in accordance with the CRS Status Message XML Schema and the related User Guide.

Findings:

Ten exchange partners highlighted delays in the sending of status messages by the United Kingdom, representing 9% of its partners. This represents a relatively high proportion of partners. The United Kingdom has still not yet sent some of the status messages due to be sent in 2021.

Based on these findings it was concluded that, overall, the United Kingdom is meeting expectations in relation to the receipt of the information. It was also noted that there is room for improvement with respect to the timeliness as regards sending status messages. The United Kingdom is encouraged to continue to ensure the ongoing effectiveness of its implementation, including by addressing the recommendation made.

Recommendations:

The United Kingdom should ensure it sends status messages to all of its exchange partners in a timely manner.

SR 2.9 Jurisdictions should respond to a notification from an exchange partner as referred to in Section 4 of the Model CAA (which may include Status Messages) in accordance with the timelines set out in the Commentary to Section 4 of the Model CAA. In all other cases, jurisdictions should send corrected, amended or additional information received from a Reporting Financial Institution as soon as possible after it has been received.

Findings:

The United Kingdom appears ready to respond to notifications and to provide corrected, amended or additional information in a timely manner and no such concerns were raised by the United Kingdom’s exchange partners and therefore with respect to the United Kingdom’s implementation of these requirements.

Based on these findings it was concluded that the United Kingdom is fully meeting expectations in relation to responding to notifications from exchange partners and the sending of corrected, amended or additional information. The United Kingdom is encouraged to continue to ensure the ongoing effectiveness of its implementation.

Recommendations:

No recommendations made.

Assessed jurisdiction’s comments on the assessment of effectiveness in practice

No comments made.

Notes

← 1. Andorra, Liechtenstein, Monaco, San Marino and Switzerland.

← 2. With Anguilla, Bermuda, the British Virgin Islands, the Cayman Islands, Guernsey, Hong Kong (China), the Isle of Man, Jersey, Montserrat, Qatar, Singapore and the Turks and Caicos Islands. The United Kingdom has also activated a relationship under the CRS MCAA with Qatar.