As many of us ease back into work after the festive break, many charities have returned to an unexpected email from their investment managers concerning changes to the common reporting standard (CRS) and the automatic exchange of information (AEOI) regime.

One of our clients received such a message just before Christmas, with a 31 December 2025 deadline attached, and understandably sought clarity on whether any action was needed.

In this blog, we summarise what has changed, what has not and how charities can determine whether they are required to register.

Why the sudden concern?

In late 2025, HMRC implemented updates to the international regulations governing the CRS through the International Tax Compliance (Amendment) Regulations 2025. These changes introduced:

  • a new mandatory registration requirement for all entities classified as financial institutions, even if they have no CRS or FATCA reportable accounts
  • a firm registration deadline of 31 December 2025, or 31 January following the year an entity first falls within scope.

This update was not widely publicised and many trustees, charities and companies only became aware of it when prompted by investment managers. For organisations closed over the Christmas break, the timing created added pressure.

Charities only need to register if they meet the definition of a financial institution

The most important clarification is this: a charity is only required to register under AEOI if it is classified as a financial institution. If it is not a financial institution, it has no AEOI reporting or registration obligations.

Under CRS rules, a charity is treated as a financial institution only if it meets the definition of an investment entity, and this requires both of the following tests to be met.

Test 1: are the charity’s financial assets managed by a financial institution?

This includes situations where:

  • an investment manager or financial institution has discretionary authority to manage the charity’s investments
  • management includes portfolio management, trading or other financial asset activities carried out on the charity’s behalf.

Test 2: does at least 50% of its income come from financial assets?

A charity meets this financial assets test if 50% or more of its gross income is derived from investing, reinvesting or trading in financial assets, eg. shares, bonds and investment portfolios.

The test can be applied over the preceding three years or the entire period of the charity’s existence if shorter.

In practice, what does this mean?

If 51% or more of a charity’s income comes from donations, legacies, grants, fundraising and similar sources, and not from investments, it will not be classified as a financial institution, even if it holds an investment portfolio managed by a professional firm.

This is the case for most UK charities and, as a result, they do not need to register under the new AEOI rules.

Why investment managers are contacting charities

Under the updated regulations, investment managers, who are financial institutions, must ensure the entities they manage are compliant. As a result, many have taken a belt and braces approach and contacted clients to double check whether registration is required.

Unfortunately, the responsibility ultimately rests with the charity to determine its status, even where the investment manager triggers the query.

Examples of charities that may need to register

Although most will fall outside scope, the following charity structures are more likely to meet the investment entity definition:

  • endowed charities with substantial investment portfolios that generate the majority of annual income
  • charitable trusts structured in a way that creates financial accounts, eg. those issuing debt interests, equity interests or making grants to overseas beneficiaries
  • charities with investment heavy income streams, particularly where that income is professionally managed.

If your charity is confirmed to be a financial institution, you must:

  • register with HMRC’s AEOI portal
  • carry out due diligence on reportable account holders, which is rare but could include certain beneficiaries or lenders
  • submit annual CRS returns where required.

Some charities that meet the investment entity tests may still qualify as non reporting financial institutions from 1 January 2026 if they meet HMRC’s definition of a qualified non profit entity, but this is subject to specific conditions and should be reviewed carefully.

The next step

Given the limited communication from HMRC and the tight deadline, it is understandable if your charity feels blindsided by these changes. However, with a clear understanding of the investment entity tests, most will find they fall comfortably outside the scope of mandatory registration.

In our client’s case, after reviewing their personal circumstances, we identified that over 50% of their income came from investments and their portfolio was professionally managed. Although this initially raised some concerns, we were able to demonstrate that they also met the definition of a qualified non profit entity and, as such, were exempt from registering under the new AEOI requirements.

If your charity receives a similar email from your investment manager, the first step is not to panic. Simply review the two tests above and, if applicable, HMRC’s definition of a qualified non profit entity. However, given the significant penalties for late registration, which can be up to £1,000 plus daily charges in some circumstances, if you are unsure of your classification we are always here to help you work through the position.

Please get in touch with James Kemp or your usual UHY charity adviser for further guidance.

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