I am looking to try and understand how the CRS rules affects trusts.
As part of FATCA we have categorised our trusts as FI’s or Passive NFE’s.
My understanding is that under CRS if we have trusts that are FI’s will need to report certain information to the UK tax authorities ( all of our trusts are UK resident).
If the trust is an non-discretionary trust, eg interest in possession trust, I believe that details of the settlors and beneficiaries need to be reported. This would be their name, address, tax reference, date and place of birth. In addition for a settlor you need to report the account balance, which would be the total value of all the trust assets, together with details of any payments made to them. For the beneficiary you would again report the account balance, being the total value of all trust assets, together with details of any distribution’s made to them in the reporting period. Presumably if you have more than one beneficiary then you do not have to state how much of the trust they are entitled to i.e. 50% and therefore when looking at the value of the trust assets report only 50% of the value as being attributable to them.
If the trust is discretionary, then you would need to report the same details for the settlors as above but for the beneficiary you would only need to report the value of any distributions made to them during the reportable period.
If the trust is a passive NFE then it does not need to do anything ?
In addition when do these reports need to be made and to whom and for what period? I have read somewhere that the first reporting period ends 31st December 2016 but am not sure of the relevant of this.
Is anyone able to confirm my understanding or point me in the right direction or indeed have considered this themselves for any trusts that they deal with.
I do not wish to toss a pink granite block into these troubled waters, but …
Fair enough to be troubles about accounts. However, there appears to be no specific final guidance given by HMRC as to whether discretionary or other trusts of land which are now pure land after s 3 ToLATA 1996 are a FATCA or a CRS trust for these purposes. (For once the Institution could do something useful to protect the laws of the land, rather than crucifying them at the OECD. There are still those filing French returns on what is land on the basis that any trust is caught by the French definition).
Trusts of land clearly should not be treated as movable accounts as the US have their own system for Realty known as FIRPTA, and for CRS, these can only be land, not some evolution of soil into a form of institutionalised account.
What is more the abolition of the doctrine ,of conversion now takes all trusts of land out of the scope of the original Hague Convention as that Convention was clearly based upon the doctrine of conversion applying to trusts of realty to render them movable in order to enable recognition. The Van Doorn Report is clear on that issue.
Just drawing a line around the scope of the issue as to “accounts”.
Reporting deadline is 31 May 2017 for the 2016 calendar year
Whilst charities are exempt from FATCA there is no such exemption under CRS but it will only really affect those charities who:
receive more than 50% of their income in the form of investment income that is under discretionary management NB investment income does not include rental income
make distributions or grants to overseas recipients - especially individuals but also foreign charities
Non charitable UK resident trusts may have to register with HMRC for CRS if they are FIs but should not have to report in respect of UK transactions - only those to recipients based in relevant jurisdictions i.e. those signed up to CRS
NFEs have no reporting requirements but may have to confirm their status to their own bankers etc.
The recent “clarification” from Pascal Saint Amans of OECD that Protectors, settlors -, excluded or not -, trustees and beneficiaries are all to be treated and declared as separate account holders in each jurisdiction is not likey to simplify matters.
That s the problem of letting a Frenchman loose on a trust concept with which he is totally unfamiliar and allowing him to treat it as a créance or in effect a movable account.
As an afterthought, a reading of the Paris Convention of 14th December, 1960, which carries the constitution of the OECD might leave some with the sour taste on their palate that it is outside the OECD’s vires or Treaty competence to make such statements, which are in fact matters of law, not economics or tax. It is not up to the OECD to make laws in democratic states, or for that matter to alter them. One can respond that he enjoys the indirect protection of the States’ laws implementing his recommendations, but hardly to the extent that these are not statutory, and matters of substantive misinterpretation of a legal concept outside his ambit of legitimate influence.
Classing a Protector as an owner of an account enabling several states to require accounting disclosures in addition to those already deemed to enjoy the capital simply does not add up.
