Trustee obligations and the HMRC Trusts Registration Service

All trustees need to retain more information on the settlor, trustees and beneficiaries. In addition certain trusts need to disclose details to HMRC.

[updates highlighted in orange]

These notes quickly became out of date, as HMRC struggle to provide a suitable service and extend deadlines/update guidance. As at January 2018, the registration service remains awful (almost as if HMRC do not understand basics of both trusts and databases). For further details please contact me, check the STEP forum and HMRC helpsheet.

ATT have provided a good guide here: https://www.att.org.uk/sites/default/files/The%20Trust%20Registration%20Service%2029%20November%202017%20ATT%20Technical%20Briefing%20note.pdf

Penalties

STEP have provided a note on penalties, which can be found here.

HMRC Trusts Registration Service

There is a trust registration service for new and old trusts. Trustees can register now. Agents will be able to do so by the end of October 2017. It replaces the form 41G(Trust).

Update: there was a HMRC webinar on this topic on 10 August, one due on 8 September 2017 and 17 November 2017.

New obligations on trustees

The legislation is contained in the The Money Laundering, Terrorist Financing and Transfer of
Funds (Information on the Payer) Regulations 2017, which came into force on 26 June 2017. This is part of the implementation of the EU Fourth Anti-Money Laundering Directive (4AML). A copy of the regulations can be found here.

Paragraphs 44 and 45 of the regulations are the key ones for trusts. The former requires trustees to keep written records of beneficial owners and provide those, if requested, when entering into business relationships or to law enforcement authorities. The latter requires HMRC to keep a register of certain trusts.

Which trusts need to register?

At the moment, it is just trusts with a UK tax consequence that need to register. The register is online only. It collects details of the settlor, trustees and beneficiaries. This includes date of birth, NI number (or address and passport number). It seems to require known discretionary beneficiaries to be logged, even if they have not (and may not) ever receive funds* from the trust. In some trusts, that could be a huge number of beneficiaries.

*Update: HMRC now appear to accept that that a beneficiary of an unnamed class (eg “the children of the settlor”) does not need to be provided until they receive funds.

The trigger for registration is “UK tax consequences*” which includes: income tax, capital gains tax, inheritance tax (eg 10 year or exit charge) and SDLT (eg buying land).

*Update: as noted on the STEP forum on 1 September 2017, this also includes stamp duty reserve tax, so looks like it includes the purchase of any shares.

The deadline for new trusts is extended to 5 January 2018.

For dormant trusts that have a taxable event, the event needs to be after 26 June 2017.

Agents will need to use a new Agent Services account, which does not appear to be part of the normal Government Gateway.

The register also collects details of the original trust assets but not additions or changes.

The HMRC software cannot handle all circumstances, in which case the online logging needs to be followed up by letter.

Future changes

There remain mismatches between the legislation and what HMRC require.

Penalties for not complying with the rules are separate from the usual tax penalties (eg failure to notify changeability) and part of the regulations, so much wider and severe.

It is possible that after the EU Fifth Anti-Money Laundering Directive (5AML), all trusts will need to register. Although cumbersome, that does make more sense from an AML point of view than just taxpaying trusts.

Actions

Obtain/update details on settlor, trustees and beneficiaries, both for the register or if any entity the trust enters into a business relationship with requests the information.

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