Beneath the Surface – A Blog by Paul Aplin OBE

Daysium’s Senior Advisor, Paul Aplin OBE, has written a follow-up to his post on today’s data-rich world. Today’s post, “Beneath the Surface,” offers a deep dive into the complexities of tax information exchange. As governments worldwide enhance their data collection and analysis capabilities through agreements like Automatic Exchange of Information Agreements (AEOIs), understanding these changes is crucial, especially for globally mobile HNWIs. Keep reading for Paul’s insights.

In my last blog for Daysium I looked at the data-wake most of us leave behind in this data-rich world we inhabit and at how we can intentionally or unintentionally reveal things of great interest to tax authorities.

Sometimes, for example if you need to prove where you were, what you did or perhaps even why, that data trail can be invaluable. At other times it can provide tax authorities with evidence of undisclosed tax liabilities.

In addition to the data that we make publicly available through social media and the data we record consciously, tax authorities have progressively gained access to vast quantities of data through Automatic Exchange of Information Agreements (AEOIs). They have also become extremely adept at using data analytics techniques and Artificial Intelligence (AI) to match data with the information that individual taxpayers have declared and to spot omissions and suspicious patterns.

The OECD Common Reporting Standard (CRS) has been implemented by over 100 tax authorities around the world and many have been exchanging information under it for 6 or 7 years now. The CRS requires participating tax authorities to gather information from financial institutions in their jurisdiction about non-resident account holders and to share that information with the jurisdiction where the account holder is resident. The required information is extensive, including sufficient details to reliably identify the taxpayer (name, address, date and place of birth, tax identification number) as well as the balance at 31 December of the relevant year together with the amount of any interest, dividends, distributions and gross proceeds from the sale or redemption of any financial assets.

The scope of the CRS has been extended to include Specified Electronic Money Products (for example, prepaid online accounts or physical cards that can be used to store money to pay for goods and services) and Central Bank Digital Currencies. In addition to this a new Crypto Asset Reporting Framework (CARF) is being added, recognising the fact that cryptoassets can be transferred and held without interacting with traditional financial institutions – and of course that this represents a significant risk of non-compliance. CARF will take effect in 2026 for HMRC.

Online platforms (for sales of goods, services and for property rental) are also now subject to cross-border reporting requirements. While HMRC already had the power to obtain information from UK based platforms, many overseas platforms will also have to provide details of transactions from 1 January 2024 (with HMRC expected to receive that information in early 2025).

Since 2016, HMRC has secured over £586 million of additional taxes through AEOI agreements.

A few years ago, exchanges of information internationally were specific to particular taxpayers and subject to a great deal of process; The CRS and FATCA (the US Foreign Account Tax Compliance Act) have changed things fundamentally; CARF will take that a stage further. Add in the processing power of modern computers, a deep knowledge of data analytics and AI and you have a radically different picture.

What was once occasional is now routine and what once took years can now be achieved in minutes.

It’s a very different world.

Today’s comprehensive tax information exchange between tax authorities requires robust record-keeping from individuals and businesses alike. If you’re looking to streamline and secure your tax residency data, consider Daysium. Our platform ensures accurate day counting and robust corroborate records, which are essential for maintaining compliance in today’s tax environment. Join the Daysium waitlist now to gain access to our innovative compliance tool.