New legislation, much of which came into force on 26 June 2017, requires trustees to hold accurate and up-to-date information on their trusts’ beneficial owners, including settlors, trustees, beneficiaries (including any potential beneficiaries) and any persons exercising effective control over the trust (e.g. protectors).
This information will also need to be submitted to HMRC in order to be added to a new online trusts register (which will not be public but will be accessible by law enforcement bodies including police forces and the NCA).
The online register was launched on 10 July 2017 with the service currently only available to individual trustees. Agents are to be given access later in 2017.
Which trusts need to be registered?
The reporting obligations apply to:
- UK resident trusts
- non-UK resident trusts which have a liability to certain UK taxes in relation to UK source income or UK situs assets.
The relevant UK taxes for the purposes of non-UK resident trusts are income tax, capital gains tax (including non-resident capital gains tax), inheritance tax, stamp duty land tax and stamp duty reserve tax.
The legislation suggests that holding UK situs assets indirectly (e.g. via a wholly owned non-UK company) will not be enough to bring a trust within the registration regime unless and until the trustee has some form of UK tax liability in relation to those assets. However, this and various other points are currently unclear.
What do trustees need to do?
Trustees falling within the scope of the new rules must:
- obtain and hold certain information about the trust and its beneficial owners as summarised below
- register the trust and the required information with HMRC
- update the trust register each year to ensure that it is kept accurate and up to date.
What will go onto the Register?
Trustees will need to provide information about the trust and its beneficial owners including:
- details about the trust itself, including: the name of the trust, 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 and valuations for each category of trust assets;
- the name of any paid legal, financial or tax advisers
- the identity of the settlor, trustees, beneficiaries (including any potential beneficiaries) and any persons exercising effective control over the trust (e.g. protectors).
The information to be submitted in relation to individuals will include their:
- full name
- date of birth
- national insurance number or unique taxpayer reference (UTR) (if they have one) or their usual residential address if they do not
- passport or ID card number if they do not have a national insurance number or UTR and the residential address provided is not in the UK.
When do trusts need to be registered?
Trustees subject to the reporting obligations should act now to acquire the relevant information. In accordance with current HMRC guidance reporting deadlines are:
- 31 January 2018 for trusts "set up" or starting to make income or chargeable gains prior to 6 April 2016
- 5 October 2017 for trusts "set up" or starting to make income or chargeable gains between 6 April 2016 and 5 April 2017
- 5 October 2018 for trusts "set up" or starting to make income or chargeable gains between 6 April 2017 and 5 April 2018.
HMRC has stated that registration must be completed by 5 October of the tax year after a trust is "set up" or after a trust starts to make income or chargeable gains, if that is later. This corresponds to the deadline for notifying HMRC of liability to income tax and capital gains tax where there is no current notice requiring a tax return.
What are the consequences of breaching the rules?
Trustees who fail to comply with the disclosure requirements risk both fines and conviction of criminal offences.