Update on the new register for trusts
HMRC recently issued an updated set of FAQs regarding the new online Trust Registration Service (TRS) and the information that certain trustees are required to maintain and report. In addition, HMRC has confirmed another extension to the deadlines for the registration of trusts with its online service.
This briefing sets out details of the key changes. Our original briefing on the TRS can be found here.
Extended registration deadline
The FAQS note that the deadline for registering trusts which were not already registered with HMRC for self-assessment, and which incurred an income tax or capital gains tax liability for the first time in the 2016/2017 tax year, has been extended from 5 October 2017 to 5 January 2018 (i.e. there should be no penalty imposed in this situation if registration is completed before 5 January 2018).
On 8 December, an extension to the deadline for registration of other trusts, i.e. those which meet the registration requirements but did not incur a tax liability for the first time in 2016/2017, was announced. This deadline has now been extended from 31 January 2018 to 5 March 2018.
Both of these extensions apply for the first year of operation of the TRS only.
Details of the availability of the relevant online services have also been included in the FAQs. In addition, links have been provided to various related websites.
Information required on beneficiaries
The original FAQs were not particularly clear on the information that is to be provided about a beneficiary who is a member of a class of beneficiaries or is a contingent beneficiary.
The updated guidance states that if a beneficiary is unnamed in a trust deed, being only part of a class of beneficiaries (e.g. the grandchildren of Mr Bloggs), then disclosure of such beneficiary’s identity is only required if they receive a financial or non-financial benefit from the trust after 26 June 2017 (the date on which the TRS Regulations came into force). This seems to be the case even if the name of one or more of the class of beneficiaries is known to the trustee.
The guidance also states that if an individual who is expressly named in a trust deed will only become a potential beneficiary contingent on some event occurring (e.g. the death of a named beneficiary), then such individual may be listed in a class until the relevant contingency occurs. It is not clear exactly how they would be described in this scenario. Presumably they could be described as “nephew of Mr Bloggs” or similar, but this seems an unusual approach when the individual is specifically named in the trust deed.
The guidance sets out how HMRC will interpret the section of the Regulations which says that individuals benefitting from a trust may be described as a class if they have not been “determined”. They say that “determined” means when a beneficiary receives a financial or non-financial benefit from the trust, because at that point the trustees will have been able to identify the beneficiary to make a distribution (and therefore their identity should be disclosed).
Furthermore, it is now stated that a trustee will not commit an offence under the Regulations if it can show that it has taken all reasonable steps to obtain the relevant information (e.g. in terms of the records that the trustee must maintain and the details it must register on the TRS about who stands to benefit from a trust).
Examples A and B
The two examples given in the initial FAQs have been extensively reworked. Overall the approach reinforces that set out above, although there are still some uncertainties.
For instance, Example A describes how a nephew, who may receive distributions following the death of a niece if none of the settlor’s grandchildren have died beforehand, is capable of being identified when he receives a distribution. At that time he should therefore be identified individually on the TRS. However, he might be expected to be disclosed individually even if he does not receive a distribution if the niece dies and none of the grandchildren have pre-deceased her. Presumably at that point the nephew is a named beneficiary and his potential to benefit is no longer contingent. The guidance says earlier on that at “such time as the contingent event occurs … the individual potentially stands to benefit and should be named”.
Example B sets out that named beneficiaries that may benefit at any time, and have received benefit, should have their individual details provided. This is because they are named beneficiaries and because they have “been “determined” in light of the trustees being able to make a trust distribution”. It is not clear why the quoted section has been included. Presumably these beneficiaries (who do not seem to form part of a class) should be individually named anyway because they are named beneficiaries, they are not within a class of beneficiaries and there are no contingencies applying to whether they can benefit. This seems to be at odds with an earlier section of the FAQs, which states that “Where a beneficiary is named on a trust instrument separate from members of a named class then they can clearly be determined and the trustees must provide the relevant information”.
The guidance on underlying companies has been amended. This addresses an unexpected section in the earlier FAQs, which stated that if an asset was owned beneficially by trustees, but legal ownership was via a nominee, then this would not create an obligation on the trustee to register.
The FAQs now reflect the interpretation that we might have expected, i.e. that HMRC will treat a trust holding UK property in the name of a nominee as holding such UK property directly. If the nominee is looked through for tax purposes, so that there is a relevant tax liability arising to the trustee and not the nominee, then there will be an obligation on the trustee to register. Consequential amendments have been made to various other sections of the FAQs to make clear how look through entities are to be treated.
Updated information requirements
The guidance states that an individual’s unique taxpayer reference number may be given instead of their national insurance number (e.g. where information is being provided on a settlor), although it indicates a preference for the national insurance number if possible. There is also guidance on details that may be given when information is not known. For instance, if the date of birth of a deceased settlor is not known then the date of 01/01/1900 may be given. Guidance is also given about unknown dates of death and addresses.
The section about how asset values should be determined has been amended, with various sections being deleted. This seems to suggest that a “good estimate” of market value will be sufficient.
Specific cases where registration is not required
The new FAQs set out a number of circumstances when registration will not be required. Many of these cover scenarios where it seemed unlikely that there would be an obligation to register, although the clarification is helpful. The most useful of these updates is that a trust need not be registered if it has no UK tax liability other than a tax liability of less than £100 of bank or building society income (i.e. a de minimis exemption).
The section setting out circumstances in which registered pension schemes are not required to register has been deleted.