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Tony Wickenden: What you need to know about HMRC’s new Trusts Registration Service

The soon-to-be launched register is set to impose a more onerous reporting obligation on many trustees.

Most trust discussions centre on what they can deliver as part of an overall financial planning strategy, with the biggest focus often on tax efficiency.

Just recently, though, they have grabbed the headlines for a different reason: HM Revenue & Customs’ new online Trusts Registration Service.

The service was due to start in June following withdrawal of the paper form 41G (Trust). However, the launch, which was intended to coincide with the beneficial owner registration requirements of the EU’s Fourth Money Laundering Directive transposed into UK law last month, has been delayed.

The register will allow HMRC to collect up-to-date trust information centrally in line with the requirements of the 4MLD.

It will require any new or existing trust that generates a “tax consequence” to provide information on:

  • The identity of the settlor
  • The trustee(s)
  • The protector (if any)
  • The beneficiaries (or class of beneficiaries if the trust is a discretionary trust) and any other persons exercising control over the trust
  • A detailed picture of the assets held.

This imposes a more onerous reporting obligation on trustees who have until now been exempt from the requirement to complete a form 41G (Trust) if there was “no income arising, and no likelihood of income or gains in the future”.

In contrast, the new requirement to register or update details online applies in any year the trust generates a UK tax consequence of any kind. This could be an income tax, capital gains tax, inheritance tax or stamp duty land tax implication, for example.

Before getting too hot under the collar about the changes, remember trusts that hold collectives will have needed to register under the previous system, so little more will change other than when and how the information is provided.

For trusts that hold no assets other than onshore or offshore single premium investment bonds, the new rules will presumably mean online registration will not be required unless either a chargeable event occurs or a chargeable occasion for IHT occurs. That said, the position is not yet completely clear.

The requirement to register will apply to both onshore and offshore trusts. However, bare trusts, where any tax liability that arises is effectively on the beneficiary rather than to the trust, are excluded from reporting.

Until the registration service is available, HMRC has asked customers to delay notification of new trusts. In the meantime, those completing trust and estate tax returns have been instructed to leave the box that asks for confirmation that changes to the trust have been updated on the register blank, with a view to ensuring correct details are recorded when it is up and running.

Once the service is operational, trustees will have until 5 October to register new taxable trusts and until 31 January to provide information on existing trusts.

So the aim of the service is to act as a single point of contact for trusts and estates to comply with their registration obligations and with notification of any changes.

It should also improve the processes around the administration of trusts and allow HMRC to gather adequate information in a central register.

The changes outlined will affect customers who need to register new trusts and estates with HMRC, and existing trustees who will need to provide and update their details.

As well as implementing the requirements of article 31 of the 4MLD, the register will be in line with HMRC’s digital strategy and provide greater tax transparency going forward.

Tony Wickenden is joint managing director of Technical Connection. You can find him Tweeting @tecconn

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Comments

There are 2 comments at the moment, we would love to hear your opinion too.

  1. Aargh…. so for pure protection policies in trust, if they get caught in the rare but possible trap of a tax charge arising (a claim or imminent death with wrong timing at 10 year anniversary)and the premium being considered “large”, whatever that means, no clue as to how ordinary trustee members of the public are supposed to know what to do about this.
    Maybe we should all just ignore it as no-one will ever know? Or with the 22% increase in IHT take indicating HMRC is getting forensic in checking returns, is that a worry for our customers?

  2. It is unusual for Tony not to be up-to-date, but the online registration system is open for business at https://www.gov.uk/government/publications/trusts-and-estates-trust-details-41g-trust.

    My belief is that all new Trusts that intend to invest in an on or offshore Bond will need to register, because of the FATCA regulations. Providers ask for the tax reference of the entity (and NI numbers of the Trustees) for this purpose.

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