HMRC announced new reporting requirements for trustees who are responsible for Trusts with tax consequences and have also launched a new Trust Registration Service. These updates follow the new EU Money Laundering Regulations and mean that the majority of Trusts which require reporting must submit data by 5 December 2017. But what information is required, and are you prepared for the changes?
We’ve provided a guide of the frequently asked questions to help you understand the new changes.
Which Trusts need to be registered on the new Trust Registration Service?
The reporting obligations apply to:
- UK Trusts;
- Non-UK Trusts which have a liability to certain UK taxes such as Income Tax, Capital Gains Tax (CGT), Inheritance Tax (IHT), Stamp Duty Land Tax (SDLT) and Stamp Duty Reserve Tax (SDRT).
Trusts which are not required to be reported:
- Bare Trusts;
- Trusts where all the income has been mandated to beneficiaries and the Trust is no longer required to submit a tax return.
Trustees not in self-assessment will need to be alert to the possibility that registration is required for tax reasons. For example, if the Trust buys a property and pays SDLT or has a liability to an IHT charge.
What do trustees need to do?
Trustees falling within the scope of the new rules must:
- Obtain and hold certain information about the Trust and its beneficial owners (this information is summarised below);
- Register the Trust and the required information with HMRC;
- Update the trust register each year to ensure that it is kept accurate and up to date.
What information do trustees need to obtain and hold?
Trustees will need to provide information about the Trust and its beneficial owners including:
- Details about the Trust itself, including the name of the Trust, the date on which it was established, and where it is resident and administered;
- Details of the Trust’s assets including a statement of accounts and valuations for each category of trust assets;
- The name of any paid legal, financial or tax advisers;
- The identity of the settlor, trustees, beneficiaries (including any potential beneficiaries) and any persons exercising effective control over the Trust (e.g. protectors).
HMRC expect all individuals named in the trust documents as actual or potential beneficiaries to be disclosed. Where beneficiaries are unknown, e.g. future unborn children, they should be disclosed as a class of beneficiaries using the wording in the trust deed. Once a beneficiary previously included in a class receives a benefit they should be disclosed in their own right.
The information to be submitted in relation to individuals will include their:
- Full name;
- Date of birth;
- National Insurance Number or Unique Taxpayer Reference (UTR), if they have one or their usual residential address if they do not;
- Passport or ID card number if they do not have a National Insurance Number or UTR and the residential address provided is not in the UK.
HMRC also require details of the assets originally introduced to the Trust including:
- Their values at the start of the Trust;
- The address of any properties;
- Details of shareholdings and investments.
HMRC are aware that some trustees may struggle finding historic information and appreciate that they will simply have to do the best that they can.
What are the consequences of breaching the rules?
Trustees who fail to comply with the disclosure requirements risk both fines and conviction of criminal offences.
Trustees need to be aware of their additional responsibilities and communicate any changes to the Trust to professional advisers promptly.
If you are unsure about the new HMRC Trust Registration Service and reporting requirements, it’s important to take advice to make sure that you avoid any consequences.
I would be happy to discuss the changes and their impact with you. For more information, whether as a trustee or an individual involved with a Trust, please contact Helen Kelly on 0161 475 7685.