We wanted to bring to your attention some recent guidance from the Institute of Chartered Accountants of England & Wales about a regulatory change for trusts. We believe that your trust may be affected.
Historically, UK trusts would only need to register and report for Automatic Exchange of Information (AEOI) purposes if they had individuals connected with the trust who are non-UK tax residents. Following the changes, HMRC will require certain types of trusts to register on their AEOI portal to comply with the UK’s international tax compliance regulations. Provided that the trustees are not making distributions to a non-UK tax-resident beneficiary, this is expected to be a one-off registration with the AEOI.
Please note that, although this AEOI registration needs to be submitted to HMRC, it is a separate compliance requirement from HMRC’s Trust Registration Service (TRS) and from the filing of any trust tax returns.
All trusts which are deemed to be a ‘Financial Institution’ need to complete this one-off registration. In this context, a ‘Financial Institution’ is broadly a trust which:
- is managed by another Financial Institution, e.g.
- its trustee is a professional entity which manages the trust in the course of its business, such as a corporate trustee; or
- its assets are managed by an investment manager under a discretionary mandate; and
- derives at least 50% of its income in a specified period from investing, reinvesting or trading in Financial Assets.
As trustees, you must determine whether the above rules apply to your trust.
A common example of where this may apply is where a trust generates its income from assets which are under the management of an investment manager. I know that some investment managers are writing to trustees about their responsibilities, too.
If you don’t register, there are initial penalties of £1,000. ICAEW updated its guidance on 17 December to say that penalties for late registration will not be issued automatically. However, HMRC asked ICAEW to pass on the following message: “Late registration penalties will not apply if you have a reasonable excuse for any delay in registering. If you need any support with registering, or think you will be unable to meet the deadline, please email enquiries.aeoi@hmrc.gov.uk.” Whilst HMRC may not issue penalties if you have a reasonable excuse, we would recommend that you email HMRC if you feel your trust needs to register and you will be unable to meet the deadline.
If you have any questions or would like to discuss whether the rules apply to you, please contact us. Unfortunately, because of HMRC’s system, we are unable to register the trust on your behalf. Therefore, if you are the trustee of a trust, then you will need to complete the registration yourself. I have attached a note detailing the registration process, which will hopefully make this as easy as possible for you.
If you would like further information or any advice, please contact us by emailing solutions@ellacotts.co.uk or call us on 01295 250401.
Information for readers: This material is published for the information of clients. It provides only an overview of the regulations in force at the date of publication, and no action should be taken without consulting the detailed legislation or seeking professional advice. Therefore, no responsibility for loss occasioned by any person acting or refraining from action as a result of the material can be accepted by the authors or the firm.
