The HMRC Trust Registration Service has now been launched and will require trustees of trusts with UK tax liabilities to be registered using the online trusts register
HMRC have recently confirmed that the deadline for trustees of trusts that have never registered with HMRC, but incurred a tax liability during the 2016/17 tax year, has now been extended from the 5 December 2017 to the 5 January 2018.
Whilst this is welcome for trusts affected, the 5 January 2018 deadline is still not far away. Set out below are the key points for trustees to be aware of, especially for trusts in the context of share schemes and employee ownership arrangements.
Which trusts need to be registered?
The new legislation is likely to apply to UK resident and non-UK resident employee benefit trusts, including employee ownership trusts and share incentive plan trusts if the trustees are liable to pay any of the taxes listed below in relation to trust assets or income.
Essentially, a trust is required to register with HMRC where it is liable to pay:
- Income Tax;
- Capital Gains Tax;
- Inheritance Tax;
- Stamp Duty Land Tax;
- Scottish Land and Buildings Transaction Tax; or
- Stamp Duty Reserve Tax.
How often and when will information need to be reported?
Trustees should act now to collate the information required by the legislation and comply with the reporting obligations as set out by HMRC. These being for:
- Trusts already registered for Self-Assessment: If the trustees have incurred a relevant UK tax liability in a given tax year then registration must be completed by 31 January after the end of that tax year.
- Trusts not registered for Self-Assessment: If the trustees have incurred a relevant tax liability for the first time in a given tax year then the registration deadline is 5 October after the end of that tax year. However, this deadline has been extended to 5 January 2018 for this first year of the Trust Registration Service only.
- Trusts not registered for Self-Assessment or those which do not need to register: If the trustees have incurred an inheritance tax, stamp duty land tax or a stamp duty reserve tax liability in that tax year the registration deadline is 31 January after the end of that tax year.
What information needs to be reported?
The relevant information to be provided by trustees includes:
- details about the trust, including the name, 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 describing the trust assets and identifying the value of each category of the trust assets (including the address of any properties held);
- the name and contact details of any paid legal, financial or tax advisers; and
- the identity of the settlor, trustees, beneficiaries and any persons exercising effective control over the trust (e.g. protectors).
For those trusts with a class of beneficiaries, some of whom have not been determined, trustees need only provide a description of the class of persons who are beneficiaries or potential beneficiaries.
Consequences of breaching the rules
A failure to comply with these new requirements could expose trustees to both civil penalties and the risk of prosecution, leading to fines or imprisonment. HMRC have however indicated penalties will be proportionate.