If you are a trustee of a non-UK trust which is subject to UK tax, you will have to keep a register of beneficial owners and provide this information to the UK Revenue (HMRC) under rules which came into force on 26 June 2017.
HMRC released guidance (in the form of FAQs) on the UK trust register on 9 October, clarifying a number of issues of particular interest to trustees of non-UK resident trusts.
Which non-UK resident trusts are caught?
A non-UK resident trust is subject to the obligations to maintain a register of beneficial owners and register with, and provide information to, HMRC if the trust:
- receives UK source income; or
- holds UK assets
on which the trust is liable to UK income tax, capital gains tax (CGT), inheritance tax (IHT), stamp duty land tax (SDLT) or stamp duty reserve tax (SDRT).
Does a non-UK resident trust that holds UK assets through a non-UK company have to maintain a register of beneficial owners and register with HMRC?
No (even if the underlying company holds UK residential property). Although the company holds UK assets and may receive UK income on which it is subject to UK tax (e.g. if it receives rental income from UK property) the trustees do not receive UK source income or hold any UK assets on which the trustees are liable to UK tax. This is the case regardless of the settlor’s domicile status when the trust was created.
Is the position different if the settlor or a beneficiary of the non-UK resident trust is liable to income tax or CGT in relation to the trust?
No. The trustees do not need to register with HMRC unless the trustees themselves are liable to UK income tax on UK source income or to one of the other specified taxes on UK assets held directly by them.
What is the position of a non-UK resident trust that holds UK assets directly?
A non-UK resident discretionary trust which holds UK assets directly will be liable to UK IHT on those assets and must keep a register of beneficial owners and register with and report to HMRC. This is the case regardless of the settlor’s domicile status when the trust was created.
The trustees must maintain an accurate and up-to-date register of beneficial owners at all times - but will only have to register with HMRC and file information on the trust and the beneficial owners when the trustees incur a liability to one of the specified UK taxes. See our guide on the UK register of trusts for non-UK trusts for some examples of how this works in practice.
What are the deadlines for registering with HMRC in relation to 2016/2017?
|New trusts that incurred a UK income tax or CGT liability in 2016/2017||5 December 2017|
|Existing trusts that incurred a UK income tax or CGT liability for the first time in 2016/2017||5 December 2017|
|New trusts and existing trusts that incurred an IHT, SDLT or SDRT liability (but no income tax or CGT liability) in 2016/2017||31 January 2018|
|Existing trusts that incurred a UK income tax or CGT liability (but not for the first time) in 2016/2017||31 January 2018|
In relation to future tax years, trustees of new trusts who incur a UK income tax or CGT liability, or of existing trusts who incur a UK income tax or CGT liability for the first time, will have until 5 October following the end of the tax year to register the trust with HMRC.
Who do trustees have to provide information on to HMRC?
The trustees must keep information on the following ‘beneficial owners’:
- settlor (even if the settlor is dead)
- beneficiaries named in the trust
- where there is a class of beneficiaries, any individual within the class that has received a benefit and so been identified as an actual beneficiary
- any individual who has ‘control’ over the trust.
An individual will be treated as having ‘control’ over the trust if, for example, he has power to add or remove beneficiaries, or appoint or remove trustees, or power to withhold consent to or veto trust distributions or amendments to the trust.
The trustees must also must also include on the register details of any individual referred to as a potential beneficiary in a letter of wishes or similar document from the settlor. An attendance note made by a solicitor is not a ‘document from the settlor’.
Trustees also need to record on the register a description of any classes of beneficiaries specified in the trust.
Trustees only have to provide HMRC with information on people who are beneficiaries of the trust at the time the trust is registered with HMRC (not as at 26 June 2017 (the date the Regulations came into force)). If the beneficiaries change between 26 June 2017 and the date the trust is first registered with HMRC - because, for example, the trust deed is amended or the settlor changes his letter of wishes - the trustees only need to provide HMRC with details of the individuals who are actual or potential beneficiaries at the time the trust is registered.
Do trustees have to provide HMRC with details of the trust assets?
HMRC has stated that the only information on the trust assets that has to be registered is the market value, at the date the trust was created, of the assets received from the settlor at that time (together with the address of any property received from the settlor and held directly by the trustees).
Can trustees amend the details of the beneficial owners held by HMRC?
Once a trust has been registered with HMRC, trustees only have to update the information on the register held by HMRC, or confirm there is no change to the information, by 31 January following the end of a tax year in which the trustees are liable to pay one of the specified UK taxes. However, the trustees can amend the details on the register held by HMRC at any time - including removing a beneficiary who is no longer deemed to be an actual or potential beneficiary of the trust.
Trustees of bare trusts are not liable to pay UK tax in relation to the trust and so do not need to register with HMRC. The trustees of non-UK resident bare trusts will not, therefore, be required to keep accurate and up-to-date records of beneficial owners.
Charitable trusts are not excluded from the requirements. A non-UK charitable trust that receives UK source income, or holds UK assets, on which the trustees are liable to one of the specified taxes will be subject to the obligations to maintain a register of beneficial owners and register with HMRC.
Donors to a charity are not generally considered to be settlors and so details of the donor(s) will not have to be included on the trust register, provided the donor does not have influence or control over the charitable trust and does not receive any financial benefit from the trust. Generally for a charitable trust the beneficiaries will be identified as a class. If grants have been made to other charities details of those charities will have to be included on the register.
HMRC’s view is that authorised unit trusts will not be subject to these obligations, but unauthorised unit trusts will need to register with HMRC if they have a liability to any of the specified UK taxes. So, for example, JPUTs (Jersey Property Unit Trusts) with UK source income or which hold UK residential property may be subject to the requirements to maintain a register of beneficial owners and register with HMRC.