Non-UK trustees who administer trusts that hold UK property, shares or other assets need to be aware of the new trust registration requirements.
The rules came into force on 26 June 2017 as part of the implementation of the EU’s fourth Anti-Money Laundering Directive.
Under the directive, a UK-taxable trust that holds assets in the UK or receives income from a UK source may be required to register the trust with HM Revenue and Customs (HMRC) under the Trusts Registration Service.
Registration is not limited to UK-resident trusts; it is vital that non-UK trustees are aware of what needs to be disclosed to HMRC as it may include trusts where the trustees, beneficiaries and protector are located outside of the UK.
When to register
A trust must be registered if it is deemed ‘UK taxable’, for example, if it is liable to pay income tax, capital gains tax, inheritance tax, stamp duty land tax or stamp duty reserve tax in the UK, and if any of the following conditions apply:
- all individual trustees are UK tax resident;
- it has a corporate trustee incorporated within the UK;
- it was funded by someone who was UK-resident or UK-domiciled at the time and it has at least one UK trustee; or
- it has no UK resident trustees but has UK assets or income from a UK source.
What to register
The amount of information that is required is rather substantial and covers various aspects of the trust, including its beneficial owners and any potential beneficiaries.
The definition of ‘beneficial owners’ is broad. It includes the settlor, trustees, ascertained beneficiaries, the class of persons in whose main interest the trust is set up, and any other individual with control of the trust.
This could be a protector, enforcer, guardian, appointer and anyone else who has a power to:
- dispose of, advance, lend, invest, pay or apply trust property;
- vary or terminate the trust;
- add or remove a person as a beneficiary, or from a class of beneficiaries;
- appoint or remove trustees or give another individual control over the trust; and
- direct, withhold consent to or veto the exercise of the four powers mentioned immediately above.
Under the regulations, the registration deadline for a trust with a tax liability in 2016/17 was 31 January 2018. However, the HMRC later extended the deadline to 5 March.
If a trust only meets registration criteria in a subsequent tax year, the deadline will be 31 January at the end of the relevant tax year.
Details required
Trust details
- Full name of trust and date it was set up
- Accounts describing trust assets and value of each category of assets at the date of settlement
- Trust’s tax residence and location of administration
- Contact address for trustees
- Full names of advisers acting on behalf of the trustees in tax affairs
Beneficial owners and potential beneficiaries’ details
- Full name and date of birth
- Nature of the individual’s role in relation to the trust
- National insurance number or unique tax payer reference, if they have one. If not, their usual residential address
Case study
Example 1
Mr X and Mr Y are the trustees of an irrevocable Maltese Trust (the ‘trust’). They are both non-UK-resident as is the settlor, Mr Z, who settled the trust on 21 May 2013.
Mr Z set up the trust for the benefit of all his children, none of whom are UK-resident. Mr Z is also a beneficiary of the trust.
On 17 July 2013, the trust acquired shares in a listed UK company through a Swiss nominee company. The trust continues to hold the shares and pay dividends to each of the beneficiaries on a monthly basis.
As trustees, Mr X and Mr Y are receiving UK source income and holding UK assets but they are not required to pay any UK tax on the dividends paid. They are therefore not required to register the trust with HMRC.
If the trust is still holding the UK shares on 21 May 2023, a 10-yearly inheritance tax charge will be payable by Mr X and Mr Y.
Although the shares were acquired through a Swiss nominee company, the nominee arrangement will be transparent and any tax liability arising as a result of this arrangement is the tax liability of Mr X and Mr Y as trustees.
Mr X and Mr Y will therefore be required to pay the necessary tax in 2024 and also register the trust with HMRC by 31 January 2024.
Example 2
If Mr Z remains non-UK resident but one of his children relocates to the UK, then Mr X and Mr Y become liable to income tax on the dividends.
This would be regarded as a taxable event and Mr X and Mr Y would have to register the trust and submit a trust tax return, too.
Further reading:
The privacy risks of cross border investing
By Luke Micallef-Trigona, solicitor; Alex Ruffel, partner, Irwin Mitchell Private Wealth
