Has anyone seen any guidance on what is required for trusts with sub fund elections? Presumably, each sub fund registers separately?
Cindy Chaplin
Larking Gowen
1 Like
This is a very good Q.
I looked at the Q&A and various other documents but could not find anything to clarify sub-fund elections.
I deal with a foreign trust which was divided into two different trusts, however, these trusts invest or lets say do everything via an underlying foreign company so it won’t need to register the trust.
But your point remains.
There is a live webinar on 17th Nov by HMRC, maybe we can ask them this then.
Sameera Nathoo
I have submitted this as a question to the Webinar panel for Friday as follows:
Q. If a trust has made a sub-fund election so that the principal settlement and sub-fund settlements are treated as separate trusts for income tax and capital gains tax purposes, should these be treated individually for the purpose of the trust register. This would be workable if the “tax trigger” is income tax or CGT but what would be the procedure if there is say, income tax and IHT are due in the same tax year as IHT applies to the settlement as a whole whereas the trust is segregated for income tax? Or is the sub fund election ignored altogether for the purpose of completing the Trust Register?
It might be a long webinar!
Mandy Connolly
LTS Tax Limited
2 Likes
I’ve looked through the Q and A myself and couldn’t find anything.
I’m signed up for the HMRC webinar, so hopefully, we can get an answer!
Cindy Chaplin
Larking Gowen
You could be right!
Thank you.
Cindy Chaplin
Larking Gowen
I’ll be interested in hearing the response.
Thanks Mandy
Lucy Orrow
Lambert Chapman LLP
Sadly, the sub-fund election question was not answered, despite me posting it again online towards the end of the webinar. Frustrating. I will email Michelle and see if I can elicit a response that way.
Re HMRC’s response to my question regarding IHT payable in respect of offshore company shares where the company holds UK residential property, it seems that what the Regs say doesn’t matter, just how HMRC wish to interpret them!
Mandy Connolly
LTS Tax Limited
We didn’t get one. Sorry. There just wasn’t enough time to get through all the questions, it would seem. I am going to contact the Helpline about this and will post their response here when I get it,.
Cindy Chaplin
Larking Gowen
1 Like
Did I hear right on the webinar last week that they will look-through the underlying entity and the trustees will be liable to IHT thus need to register under TRS? 
Sameera Nathoo
I have emailed John M - from the webinar the following question. He kindly told me to email him any questions when I had a technical issue couple of days ago.
It’s regarding sub-fund elections.
I take care of two foreign trusts which only incur 10-year IHT charge every 10 years. The last one was in August 2015. These trust won’t need to register to TRS since the chargeable event was before 2016/17.
The two trusts have their own individual IHT references for IHT return submissions. (let us call these trusts D1 and D2)
These two trusts have elected to have two sub-funds jointly, one is for income only distributions and the other is for capital only distributions to the beneficiaries. (let us call these sub-funds SFE and SFC)
The capital only sub-fund incurs IHT exit charge whenever there is a capital distribution. The IHT returns are filed under D1 and D2 and not as SFE and SFC.
Therefore my questions are:
A) for IHT purposes the chargeable event is in D1 and D2, and these will need to be registered under the TRS, am I right on this?
B) Trusts D1 and D2 don’t have a UTR (SA type) but IHT reference number. Can the IHT reference number be used instead of UTR for TRS registration?
C) In the event, SFE or SFC has an income tax or CGT liability - do we need to update the TRS as D1 & D2 or will SFE & SFC need their own TRS registrations?
Many thanks for your assistance with this
Sameera Nathoo
I went through the webinar recording again and noted down the reply to the question below:
Audience Question:
Q: HMRC’s FAQs which were published on 9 October clearly state on page 15 that if a liability to IHT or CGT arises on a UK residential property owned by an underlying company, the trustees are not required to register on the TRS. This is in line with the Regulations which state that the trustees must hold a UK asset on which it is liable to pay tax. For IHT purposes, although the trustees are liable to pay the IHT in such circumstances (re 10 year charges etc.), the tax is charged on the value of the underlying company shares to the extent they are attributable to the UK property, not on the UK property itself.
I have now heard that HMRC have confirmed (to one of the Big 4) that this was not the intention of the legislation and that this will be changed so that trusts which pay IHT in relation to UK residential property (but do not directly hold that property) will be required to register. Could you confirm when it is anticipated that this change will be made and whether it will impact the January 2018 reporting
A: .
Recorded reply at 30.57 mins of the webinar:
The legislation was first drafted on the basis that there was no look-through and the tax was paid directly by the company in question as opposed to the trustees. As the first sentence in the second paragraph states, the tax liability must fall on the trustees directly and not either the UK or non-UK company owned by the trust. This is the key trigger event which requires registration, so there will be instances where the look-through legislation will resort in the legal incidence of the tax liability falls on the trustees and under these circumstances the trust will indeed be required to register on the TRS.
I don’t see that this will affect or impact on the Jan 31 2018 deadline.
I then had a further question myself:
Do trusts which had IHT liability in 2016/17 have to register by Jan 31 2018? Or does the registration start from having IHT liability in 2017/18, the registration of which will be by Jan 31 2019?
Which HMRC confirmed in a previous reply on this webinar that if IHT charge occurred in tax year 2016/17 than the trust should register by Jan 31, 2018.
(See page 13-15 of Q&A of 9th Oct)
(I think this is what was meant by it won’t have any impact on the Jan 31 2018 deadline).
Sameera Nathoo
Sameera, a 2016/17 IHT charge would be reportable by January 2018 but any charge arising as a result of the Finance Act No.2 2017 changes could only arise in 2017/18 or later so would only be relevant for January 2019 reporting. I referred to January 2018 reporting in error in my webinar question which may have confused matters.
I have had a response back from John Mulholland regarding the registration of sub-funded trusts as follows:
" As the sub-funds are treated as separate trusts with their own UTR’s, then they will need to be registered separately. This is subject to the trustees having to pay any of the relevant UK taxes, so I suspect there could be situations where not all the sub-funds have to register in the same year. Having said that, I would say that where a sub-fund needs to register, the principal settlement should always be registered."
I then posed the question about whether in the event of an IHT liability only the details of the principal settlement and the sub fund settlement (or settlements) holding the asset giving rise to the liability needed to be registered even though the trust is not sub-funded for IHT purposes or whether in such instances the principal settlement and all the sub fund settlements would have to register. I have not yet had a response to that.
Mandy Connolly
LTS Tax Limited
2 Likes