The UK Register f Trusts 23 Octber 2017 If yu are a trustee f a UK resident trust r f a nn-resident trust which has UK assets r UK surce incme yu may need t take actin befre 5 December 2017. Backgrund As part f the fight against mney-laundering, rganised crime and terrrist financing, the EU's Furth Anti-Mney Laundering Directive ('4MLD') was sanctined in 2015. It includes prvisins designed t increase the transparency f cmpanies, trusts and ther structures with a requirement fr each EU Member State t keep a register f trusts. UK regulatins (the 'Regulatins') t implement the UK register f trusts were published in draft earlier in 2017 and came int frce n 26 June 2017. HMRC has nw (n 9 Octber 2017) published much needed guidance (the 'Guidance') http://www.step.rg/sites/default/files/plicy/hmrc_trs_guidance_faq_- _9_Octber_2017.pdf. The Guidance addresses a number f issues and this nte reflects HMRC's views, althugh there are still a number f pints which require clarificatin, as set ut belw. With penalties fr nn-cmpliance t include civil and criminal penalties as well as a fine and up t tw years in prisn, it is imprtant yu understand what is required and by when. Functin f the Register The Register, which will be perated by HMRC, is t perfrm tw functins, namely prviding: (1) a register f the beneficial wnership f relevant trusts as envisaged by 4MLD; and (2) the means fr trustees t register trusts with HMRC fr the purpses f btaining a Unique Tax Reference Number ('UTR') and delivering tax returns. As a cnsequence, in May 2017, HMRC withdrew Frm 41G, the paper frm which trusts previusly had t use in rder t register themselves with HMRC fr tax reprting purpses. HMRC has nw launched a new nline prtal t replace Frm 41G, which allws trustees t register their trusts fr bth f the purpses listed abve. The service became available fr agents n 17 Octber 2017. Wh can access the Register? At this stage the Register will be private. The Register may, hwever, be inspected by any 'law enfrcement authrity', which includes HMRC, the Financial Cnduct Authrity, the Natinal Crime Agency, the varius UK plice services and the Serius Fraud Office. The EU's Fifth Anti-Mney Laundering Directive, which requires trust registers t be made public, is still being cnsidered in the EU legislative prcess. Wh has t register and when? All UK resident trusts with UK tax cnsequences in a given tax year will be required t register with HMRC r update their details n the register. A UK tax cnsequence will arise if the trust incurs UK liabilities fr incme tax ('IT'), capital gains tax ('CGT'), nn-resident CGT, inheritance tax ('IHT'), stamp duty land tax ('SDLT') r stamp duty reserve tax ('SDRT').
Trustees f a nn-uk resident trust will nly need t register r update their details n the register in respect f a given tax year if the trust receives UK surce incme r has UK assets n which the trustees have incurred a liability t pay any f the abve-mentined taxes in that tax year. Generally, trustees f trusts with UK tax liabilities in 2016/17 will be required t prvide the necessary infrmatin n r befre 31 January 2018, but see belw fr exceptins. Nte that registratin is required even thugh the trustees have already submitted a Frm 41G t HMRC and/r are already paying UK tax. It is nt clear whether HMRC intend t ntify trustees f this requirement. While trustees have cntinuing UK tax liabilities they will be required t ntify HMRC f changes t the infrmatin cntained in the Register (but nt changes t asset values) by 31 January after the relevant tax year, r, if there are n changes, t cnfirm this. There is n need t ntify changes in a year in which trustees have n relevant tax liabilities, but changes may be made vluntarily. Mre detail as t registratin deadlines The date by which a trust must register depends n that trust's particular circumstances and, in the case f trusts which becme registrable in future, the deadline depends n the taxable event by virtue f which the bligatin t register arises. The table belw sets ut the ptential scenaris and the applicable deadlines fr registratin in each case as cnfirmed in the Guidance: Taxable event Scenari Deadline fr registratin IT, CGT Trusts which: 5 December 2017 (a) (b) nly became liable fr IT r CGT fr the first time during the 2016/17 UK tax year; and have nt previusly registered with HMRC using Frm 41G IT, CGT, IHT, SDLT, and SDRT Trusts which: (a) were liable fr relevant UK taxes in the 2016/17 (b) tax year; and have already registered with HMRC using Frm 41G 31 January 2018 (unless the trust was wund up befre 31 January 2018, in which case it des nt need t be registered n the Trust Registratin Service) IT, CGT Trusts which becme registrable fr reasns f UK incme tax r CGT during 2017/18 (r subsequent tax years) 5 Octber 2018 (r 5 Octber in the relevant tax year) IHT, SDLT and SDRT Trusts which becme registrable fr reasns f IHT, SDLT r SDRT during 2017/18 r subsequent tax years 31 January 2019 r 31 January after the end f the tax year in which the chargeable event ccurs (rather than the payment deadline)
What infrmatin must be prvided? The trustees will need t prvide infrmatin n the identities f the fllwing individuals/entities: settlr(s) even if dead; trustees; beneficiaries; all ther natural r legal persns exercising effective cntrl ver the trust, (fr example, a prtectr wh can appint trustees r add r remve beneficiaries) and the nature f their cntrl; and all ther persns identified as ptential beneficiaries in a dcument r instrument relating t the trust, including a letter r memrandum f wishes frm the settlr. The infrmatin must include the persn's name, date f birth, Natinal Insurance Number r UTR (r, if nne, residential address) and, if they are nn-uk resident, their passprt r ID number, cuntry f issue and expiry date. If the trust has mre than ne settlr the registratin service currently permits nly tw settlrs t be recrded and any thers have t be ntified t HMRC by pst. The Guidance cntains details f infrmatin which shuld be prvided in relatin t dead settlrs. The registratin service als currently allws details f up t five trustees t be recrded and, again, details f thers must be sent by pst. The Regulatins indicate that if a trust has a class f beneficiaries, nt all f whm have been determined, then it will nt be necessary t reprt all f the abve infrmatin. Instead, trustees will need t prvide a descriptin f the class f persns wh are entitled t benefit frm the trust. The same applies t persns wh are referred t as a class in a letter f wishes frm the settlr. Hwever, the Guidance is unclear as t what this means in practice and suggests that, even in the case f a discretinary trust, full details will be required fr identifiable living members f the class. Trustees will als be required t prvide general infrmatin n the nature f the trust, namely: its name; the date n which it was established; a statement f accunts describing the assets (including the addresses f any UK prperties) and the market value f the assets as at the date they were settled int trust (previusly reprted n Frm 41G); the cuntry in which it is tax resident; the place where it is administered; a cntact address; and the full name f any agent wh is acting n behalf f the trustee in relatin t the trustees' registratin affairs.
Fr what purpse will the infrmatin be used? Accrding t the UK Gvernment, the infrmatin will be used t give 'law enfrcement and cmpliance fficers the tls they need t cmbat the misuse f trusts'. HMRC will als be able t cmpare the Natinal Insurance Numbers r UTRs f the parties t a trust and factr these int its wide understanding f thse persns' tax liabilities. What are the penalties fr nn-cmpliance? These are nt finalised but will include civil and criminal penalties, including a fine and up t tw years in prisn. The Guidance indicates any civil penalty will be 'prprtinate t the ffence cmmitted'. Recrd keeping Trustees wh are nt required t register may nevertheless be bliged t keep up t date written recrds f the infrmatin described abve and t disclse it when entering int any transactin n behalf f the trust r when requested t d s by any law enfrcement authrity. Sme FAQs Des the requirement t register apply t a trustee f a UK resident trust which hlds a life insurance plicy r a prperty r ther assets which des nt generate incme r gains? There is n requirement t register such a trust unless and until a UK tax liability arises, fr example when the prperty is rented ut r sld and generates incme r capital gain; in the case f a life plicy the paying ut f the plicy prceeds will nt usually trigger a tax event, but investment f the prceeds may give rise t a tax event in the future. We are trustees f a nn-resident trust which des nt hld any UK assets r have any UK surce incme, but the settlr r life interest beneficiary is UK resident and pays tax n the incme and gains; d we need t register? The requirement is fr the trustees t have a tax liability s yu d nt need t register in this circumstance even thugh a settlr may be able t reclaim the tax frm the trustees. We are trustees f a nn-resident trust which hlds UK assets thrugh a whlly-wned nn-uk resident cmpany This will nt in itself result in the trust being registrable, ie nly taxatin at the trust level is relevant. The Guidance suggests that the same applies if the cmpany is nt the beneficial wner f the assets but is hlding as nminee fr the trustees. This des nt appear t be a crrect analysis. I am a trustee f a charity which is registered with the English Charity Cmmissin? D I need t register? The Regulatins d nt cntain any specific exemptin fr charitable trusts, but the Guidance cnfirms that prvided the charitable trust des nt incur a liability t ne f the relevant taxes, there will be n need t register. A charitable trust wuld be required t register if the trustees incur nn-charitable expenditure r are in receipt f nn-exempt incme. The trustees f all charitable trusts will need t cmply with the recrd-keeping requirements referred t abve.
D trustees f bare trusts need t register r keep recrds? The Guidance cnfirms that trustees f bare trusts d nt need t register as any tax liability will fall n the beneficiary. This will als include mst trusts established as a result f c-wnership f land. Hwever, the Guidance requires that trustees f bare trusts still maintain accurate and up t date written recrds, as referred t abve. D persnal representatives need t register? The Guidance makes it clear that nly 'cmplex estates' need t register, althugh nce the estate is administered and trustees take ver in relatin t any trust f residue r ther trust under the terms f a Will, registratin will be required at that time. A 'cmplex estate' is ne the value f which exceeds 2.5m, r the tax due fr the whle f the administratin perid exceeds 10,000 r the value f assets sld in any tax year frm the date f death up t April 2016 exceeds 250,000, r 500,000 fr deaths after April 2016. If yu have any questins, please cntact Janette Cattell, Rbert McLean r yur usual Withers cntact. Alternatively email enquiries.uk@witherswrldwide.cm The infrmatin and pinins cntained in this publicatin d nt cnstitute prfessinal advice. If yu d nt wish t receive infrmatin frm Withers/Withers Bergman email unsubscribe@witherswrldwide.cm with yur details.