In keeping with the trend of greater tax transparency and combined with the Fourth Money Laundering Directive (“4MLD”), the Government has now introduced a new Trust Register effective from 26 June 2017.
This means that trustees of both UK trusts and non-UK trusts are now faced with maintaining accurate and up-to-date records of all the beneficial owners of the trusts that they administer and will also be required to report such information to HM Revenue & Customs (“HMRC”) to be kept on a UK register of trusts.
Which trusts are affected
All UK trusts whereby:
- All the trustees are UK resident.
- At least one of the trustees is UK resident and the settlor was UK resident at the time the trust was set up, or when the funds were added to the trust.
Non-UK trusts to the extent that the trusts have UK income or assets which generate a tax liability for the trust itself. A UK tax consequence will arise if the trust is liable to pay the following:
- Stamp Duty Land Tax (“SDLT”) – for example where the trust acquires fixed property.
- Income Tax – for example where the trust derives rental income from UK property.
- Capital Gains Tax (“CGT”) – for example where a trust disposes of a UK residential property.
- Inheritance Tax (“IHT”) – for example where the trust is subject to the ten yearly or exit charges.
Non-UK trusts which own UK property through a non-UK company should not fall within these rules simply because of the indirect ownership of UK property, as any UK tax liability would fall upon the non-UK company. However, the Government has introduced new legislation effective from 6th April 2017, whereby non-UK companies owning UK residential property will be examined for IHT purposes. Consequently, UK residential properties held in such structures means that trusts will be subject to the ten yearly IHT charge, which would then effectively generate a UK tax liability for the trust itself triggering a need to register with HMRC.
This just means that each trust needs to be looked at carefully on a case by case basis to ensure that all angles have been covered when concluding whether there is a need to register or not.
What information must be provided
The trustees will need to provide information on the identities of the following:
- All other natural or legal persons exercising effective control over the trust;
- All other persons identified as potential beneficiaries.
The details to be supplied include name and address, date of birth, National Insurance number or Unique Tax Reference, and if they are non-UK resident, their passport number or ID number.
The regulations also indicate that if a trust has a class of beneficiaries, not all of whom have been determined, then trustees will simply need to provide a description of the class of persons who are entitled to benefit from the trust.
Trustees will also be required to provide general information on the nature of the trust to include:
- Date on which it was created;
- Statement of accounts describing the assets and identifying the value of each category of the trust assets;
- The country where it is resident for tax purposes;
- The place where it is administered;
- A contact address;
- Names of any advisers who are acting on behalf of the trustees to provide legal, financial tax or other advice.
For trusts which already exist, the first filing deadline will be on or before 31st January 2018. For new trusts the first filing deadline will be 31st January after the tax year in which the trustees first become liable to pay UK taxes.
There will be an annual requirement on or before 31st January to report any changes that have occurred in the previous tax year or to confirm that there have been no changes. If the trust is not liable to pay any UK tax in the tax year in which the change occurs, the notification requirement does not arise until 31st January after the next tax year in which the trust is liable to UK tax.
Who can access the register?
The register will not be publicly available but the information on the register may be inspected by certain law enforcement authorities including HMRC itself.
Trustees should ensure that they understand their registration and reporting obligations in this ever-changing environment, as failure to comply could result in serious penalties. The Gerald Edelman team can help identify whether there is a need to register or not and can assist with the registration process where relevant.
If you would like to discuss the points raised in this article, please contact your usual Gerald Edelman contact or Graham Busch or Sonal Shah at firstname.lastname@example.org email@example.com or on 020 7299 1409.Back to top