Having got through the job of registering trusts with the Trust Registration Service and raising bills for this, my mind has turned to the treatment of those fees in the annual accounts. I am inclined to see the registration as being an obligation on the trustees due to the fact that there is a trust and so a capital cost. Has anyone else considered this as yet?
Jeremy Crouch
Clintons
I take the view that its a capital cost too. My reasoning is that trustee costs are capital costs unless EXCLUSIVELY attributable to income. The registration is for the purpose of annual income AND capital gains tax returns.
Simon Leney
Cripps LLP
I hadn’t thought about it but will be interested in others opinions. We charged a fee for the registration this year but intend to include the annual review costs in their normal fees for preparing accounts and tax return. I can see why the initial cost might therefore be capital.
Lucy Orrow
Lambert Chapman LLP
I have.
I have based my apportionment based on why the trust needed to be registered in the first place. I mainly deal with offshore trusts. So this is in relation to offshore trusts.
i.e. I registerted a trust which is a capital trust i.e. distributes capital only. The only tax charge for the trustees is IHT exit charges and 10 year charge. In this case , the registration is clearly capital.
For other trusts that only have income tax liability i.e. tax on UK source income, then this will be an income charge.
For trusts that have both income and capital gains tax charges, maybe divide equally between income and capital?
Sameera Nathoo
I saw this looking for something else on these forums and saw this so thought I would add what our firm does.
Generally we split TMEs between capital and income and have treated the TRS fee the same.
If there are no income TME’s for whatever reason then we would put the TRS fee to capital.
The above views are interesting. I think, within reason, HMRC will accept whatever stance is adopted if consistent over time.
Initial registration costs (ie “one-off”) are by definition not of a recurrent nature. They are incurred for the benefit of both income and capital beneficiaries. I therefore would have thought they are clearly capital in nature; no apportionment between capital and income.
With respect to “on-going” (annual) costs these would appear to be of a recurrent nature.
However, for relevant trusts not requiring registration due to tax considerations, such costs should be treated as capital costs; such costs would not have been incurred wholly and exclusively for the benefit of the income beneficiaries.
For relevant taxable trusts, where costs relate to both income and capital are chargeable wholly to capital. It should, nevertheless, in principle be possible to apportion costs as between income and capital if appropriate (if apportionment not possible then only apportionable against income if wholly and exclusively incurred for the benefit of the income beneficiaries).
Malcolm Finney
I would agree that, if registering for a reason relating to capital (eg an IHT or SDLT liability) it would be a capital cost. If registration is solely because of an income tax liability, I would treat as an income expense. Where it’s a combination or is lumped in with other TMEs, I would apportion between income and capital.
James Heathcote CTA
Lancaster Knox and
Knox House Trust UK
I don’t think it is possible to say that a trust is being registered solely because of an income tax liability.
While the process of registration on the TRS is used to generate a UTR, HMRC having amalgamated two systems to do so, the primary purpose of the TRS being enacted was for compliance with Money Laundering Directives, such that information on the beneficial owners of trusts was held in a central register.
I personally would find it extremely difficult to argue that this can possible be solely for the benefit of the income beneficiaries, even if generation of a UTR was part of this process.
Duncan McGowan
Stevens & Bolton LLP