The deadline for registering details of trusts which have never been registered with HMRC , but had a tax liability during 2016/17 (Income Tax or Capital Gains Tax), has been pushed back from 5 December to 5 January .
This delivers a level of relief amongst the agents responsible for registering. However, they are still fast approaching and require attention, so we have compiled some salient points for you to keep in mind.
Compliance and Registration
The deadlines for registering details of trusts caught by the new Trust register regulations are fast approaching. As a reminder:
If you are a trustee of a trust that is not already registered for self-assessment but the trust has a UK income tax or capital gains tax liability for the tax year 2016/2017, the deadline was extended from 5 December, to 5 January 2018.
All other trusts that must register, in respect of 2016/17, have a deadline of 5 March 2018 – which has recently been pushed back from 31 January 2018. This includes all existing trusts with continuing UK Tax liabilities, or even taxable events where no tax is payable, although any tax that is payable must be paid by the normal 31 January deadline.
The information that must be given to HMRC for the register is extensive and includes details that trustees may not have on their own files and will need to obtain from third parties, including national insurance numbers or taxpayer references of beneficiaries. This may extend the time trustees need to ensure correct registration and trustees will therefore need to move quickly.
At present, we do not know what the penalty for late registration or failure to register will be. Under the heading “What are the penalties for not complying”, the HMRC’s guidance rather unhelpfully says “we will set out in the near future our penalty framework”.
Do you need to register?
The new regulations will include many trusts that have previously had no obligation to have any direct relationship with HMRC.
Given the tight deadlines for registration, non-UK resident trustees in particular should review their trusts and identify any that hold UK assets or receive UK source income and those with a UK resident or UK incorporated co-trustee. Details of these trusts may need to be registered with HMRC if they have a UK tax liability.
Applying the Regulations in practice is causing some interesting anomalies. For example, we have been considering a case where a trust with non-UK resident trustees wholly owns a foreign holding company that itself owns a UK residential property. The property is let on commercial terms and the company pays UK income tax on the rent. The trust itself has no UK assets or income.
As a result of changes to in the Finance Bill this year, the shares in the company ceased to be excluded property and at the next 10 year anniversary of the trust, the trustees will have to report and pay inheritance tax. However, the Regulations state that to be registerable, a trust of this type must own UK assets. It therefore appears that while the trust will have a UK tax liability at its 10th anniversary, the trustees will still not have to register information about the beneficial ownership as the trust owns no UK assets itself. We have advised that the position should be kept under review - it is possible that HMRC will wish to include trusts in this type of scenario and legislation could be changed so that the shares in the company are treated as UK assets.
If in doubt, trustees should take advice as soon as possible as to whether a trust must be registered.
How do you register?
As an agent you will need to contact HMRC to gain access to the Trust Registration Service , through the Agent Services account, and create a new government gateway account for this purpose using the link provided by HMRC in their response. The service is still on a BETA platform so HMRC are limiting access.
Once you have gained access you are able to input the relevant information in the online form saving as you go. The information will remain in the system for 28 days before being automatically deleted if not submitted.
In practice it is sensible to gather all the information required prior to completing the online form. Once you have the information to hand the completion of the online form is user friendly. However, there are still some gremlins in the system, for example you are required to input the National Insurance number for a deceased settlor before the form allows you to move forward. This is not practical in many cases and we are hopeful that HMRC will provide a workaround shortly.
Impact on future use of trusts
The new requirement to register may affect how existing trusts are handled in future and how new, post-register, trusts are drafted. In particular, Individual settlors will need to be aware that if their trust must be registered, details of all identifiable actual or potential beneficiaries – those named in a letter of wishes as well as the trust deed itself - must be obtained by the trustees. This may mean, for example, disclosure of the existence of the trust and its details to individual beneficiaries. In difficult family situations or where a person has only been included as a beneficiary in an extremely remote, ‘if all else fails’ scenario, this may cause some difficulties.
There have been some amendments to the Guidance from HMRC, in response to concerns from professional bodies, but uncertainties remain and further clarification has been sought.
The regulations require registration based on the position of the trust in 2016/2017, so if a trust is required to register, changing its terms or its letter of wishes now will not change this requirement. However, trusts that are not now registerable but may be in future (for example, those that own UK property and may face a 10 year inheritance tax charge) should be reviewed. Trustees or existing and proposed trusts should take advice on and discuss the choice of beneficiaries with settlors and (in the case of non-UK trustees) look at how and whether they hold UK assets.
If you require further information on the trust register, you will find our UK Trust Register Briefing Notes below.
If would like us to undertake a review of your trust or legal structuring, please do not hesitate to get in touch with our team .
Published: 15 November 2017
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November 2017
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