Should employment related trusts register via the new Trust Registration Service?
How should employment related trusts register?
The regulations implementing the Fourth Money Laundering Directive (MLD4) came into force on 26 June 2017 and with them came the requirement for certain trusts to provide specified information to HMRC.
The Trust Registration Service (TRS)
To facilitate the provision of the information required under MLD4, HMRC has launched the TRS. The current version of the TRS allows trusts to register with HMRC and provide the required information but this is still only phase 1 of the project. In 2018 HMRC expect phase 2 to deliver additional TRS functionality allowing information provided to HMRC to be updated, changed and maintained.
The TRS went live for trustees in July 2017 but did not go live for agents until mid-October
Who needs to register and when?
Reg 45 of the MLD4 regulations imposes upon HMRC a requirement to maintain a register of beneficial ownership:
45(1) The Commissioners must maintain a register (“the register”) of—
(a)beneficial owners of taxable relevant trusts;
(b)potential beneficiaries (referred to in regulation 44(5)(b)) of taxable relevant trusts. [our underline]
As the underlined terms show, the register is framed around what constitutes “taxable relevant trust”. That definition is built upon the wider definition of a “relevant trust” (a concept which is important in its own right in relation to other non-register related obligations the discussion of which is outside the scope of this article).
A “relevant trust” is defined as (broadly):
- a UK resident trust; or
- a non-UK resident trust which has either UK assets or UK source income on which it is liable to pay UK tax.
A “taxable relevant trust” is (broadly) a “relevant trust” that, in a specific tax year, is liable to income tax, CGT, IHT, SDLT, LDTT or SDRT.
In the context of employment related trusts therefore, a UK resident EBT is likely to be considered a “taxable relevant trust” (it will certainly be a “relevant trust”).
On the other hand, an offshore EBT may or may not be a “taxable relevant trust” – this will depend upon the exact circumstances (e.g. is a dividend waiver in place? how are the shares owned?).
A SIP must be UK resident so will certainly be a “relevant trust”. However, as SIPs are normally exempt a SIP
should not constitute a “taxable relevant trust” for most tax years (in certain circumstances it will).
An EOT is likely to be a “taxable relevant trust”.
What must be provided?
The information required from the trustees of a “taxable relevant trust” is extensive. The following information must be supplied regarding the trust:
- the full name of the trust;
- the date on which the trust was set up;
- a statement of accounts for the trust, describing the trust assets and identifying the value of each category of the trust assets at date of settlement (including the address of any property held by the trust);
- the country where the trust is considered to be resident for tax purposes;
- the place where the trust is administered;
- a contact address for the trustees;
- the full name of any advisers who are being paid to provide legal, financial or tax advice to the trustees in relation to the trust (although HMRC’s guidance states that only the details of the agent undertaking the TRS registration is required).
The following must be provided regarding the beneficiaries:
- the individual’s full name;
- the individual’s national insurance number or unique taxpayer reference, if any;
- if the individual does not have a national insurance number or unique taxpayer reference, the individual’s usual residential address;
- if the address provided is not in the United Kingdom—
- the individual’s passport number or identification card
number, with the country of issue and the expiry date of the passport or
identification card; or
- if the individual does not have a passport or identification card, the number, country of issue and expiry date of any equivalent form of identification;
- the individual’s date of birth;
- the nature of the individual’s role in relation to the trust.
And the following must be provided regarding corporate beneficiaries:
- the legal entity’s corporate or firm name
- the legal entity’s unique taxpayer reference, if any;
- the registered or principal office of the legal entity;
- the legal form of the legal entity and the law by which it is governed;
- if applicable, the name of the register of companies in which the legal entity is entered (including details of the EEA state or third country in which it is registered), and its registration number in that register;
- the nature of the entity’s role in relation to the trust.
Where the beneficial owners include a class of beneficiaries, not all of whom have been determined, a description of the class of persons who are beneficiaries or potential beneficiaries under the trust is also required.
Wher e the trustees of a “taxable relevant trust” become aware that any of the information provided has changed they must notify the Commissioners of the change and the date on which it occurred on or before 31st January
- after the tax year in which the change occurred; or
- if the trustees are not liable to pay any UK taxes in that year, after the tax year in which the trustees are liable to pay any UK taxes (i.e. after a tax year in which the trust is a “taxable relevant trust”).
If the trustees are not aware of any change to any of the information provided, they must confirm that fact to the Commissioners on or before 31st January after the tax year in which the trustees are liable to pay any UK taxes (i.e. after a tax year in which the trust is a “taxable relevant trust”). This is done via the tax return (box 20 for 2016/17).
The deadlines for MLD4 purposes are those set out above i.e. 31st January after a tax year in which the trust is a “taxable relevant trust”.
However, as part of the introduction of the TRS, HMRC also decided to cease using Form 41G (Form 41G was the form trustees traditionally completed to obtain a trust UTR). The TRS now serves the function of registering a trust for both MLD4 and UK tax purposes (i.e. obtaining a UTR).
Because of this dual function, new trusts requiring a UTR for filing a 2016/17 tax return therefore needed to register on or before 5 October 2017 although HMRC have said they will not levy penalties if this is done before 5 December 2017.
Trusts which already have a UTR need to register and report the information listed above via the TRS by 31st January. They also need to file any tax returns as normal by 31st January 2018.
Trustees of trusts which already have a UTR should note that no information provided previously on the Form 41G will be pulled through into the TRS so they should be prepared to provide all the relevant data.
We are currently waiting on HMRC to confirm what penalty measures will be applied forfailure to comply with the above deadlines.
Further information can be found here along with a series of FAQs published by HMRC.
If you have any further queries, please do not hesitate to get in touch with your normal contact or email firstname.lastname@example.org
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